Filed with the Securities and Exchange Commission on November 24, 1999 Registration No. 333-[ ] =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 --------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- BROADBAND SPORTS, INC. (Exact name of registrant as specified in its charter) <TABLE> <S> <C> <C> Delaware 7375 95-4673805 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) </TABLE> 1640 South Sepulveda Boulevard, Suite 500 Los Angeles, California 90025 (310) 996-0067 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) --------------- Richard D. Nanula Chairman of the Board and Chief Executive Officer Broadband Sports, Inc. 1640 South Sepulveda Boulevard, Suite 500 Los Angeles, California 90025 (310) 882-7577 (Name, address, including zip code, and telephone number, including area code, of agent for service) --------------- Copies of all communications to be sent to: <TABLE> <S> <C> Peter E. Williams III, Esq. Kenneth L. Guernsey, Esq. Victor H. Sim, Esq. L. Kay Chandler, Esq. Maile Y. C. Yang, Esq. Michael W. Hauptman, Esq. MORRISON & FOERSTER LLP Cecilia M. Mao, Esq. 755 Page Mill Road COOLEY GODWARD LLP Palo Alto, California 94304 One Maritime Plaza, 20th Floor (650) 813-5600 San Francisco, California 94111 (415) 693-2000 </TABLE> --------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement. If any of the securities being registered in this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [_] <TABLE> <CAPTION> CALCULATION OF REGISTRATION FEE ====================================================================================================== Proposed Maximum Amount of Title of each class of Aggregate Registration securities to be registered Offering Price(2) Fee(2) ------------------------------------------------------------------------------------------------------ <S> <C> <C> Common Stock ($0.001 par value)(1)................. $46,000,000 $12,788(3) ====================================================================================================== </TABLE> (1) Includes shares that the underwriters have the option to purchase to cover over-allotments, if any. (2) Estimated solely for purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act. (3) $11,120 previously paid. --------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ===============================================================================

PROSPECTUS (Subject to Completion) Issued , 1999 Shares BROADBAND SPORTS, INC. COMMON STOCK ----------- Broadband Sports, Inc. is offering shares of its common stock. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price will be between $ and $ per share. We have requested that the underwriters reserve up to shares of common stock from the underwritten offering to be offered at the public offering price to certain persons designated by us. See "Underwriters." ----------- We have applied to have the shares of common stock approved for quotation on the Nasdaq National Market under the symbol "BBND". ----------- Investing in the common stock involves risks. See "Risk Factors" beginning on page 8. ----------- PRICE $ A SHARE ----------- <TABLE> <CAPTION> Underwriting Price to Discounts and Proceeds to Public Commissions Broadband Sports -------- ------------- ---------------- <S> <C> <C> <C> Per Share............................... $ $ $ Total................................... $ $ $ </TABLE> Broadband Sports has granted the underwriters the right to purchase up to an additional shares of common stock to cover over-allotments. The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Morgan Stanley & Co. Incorporated expects to deliver the shares to purchasers on , 1999. ----------- MORGAN STANLEY DEAN WITTER HAMBRECHT & QUIST SG COWEN , 1999 The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

[Screen shots of various Broadband Sports web sites] 2

TABLE OF CONTENTS <TABLE> <CAPTION> Page ---- <S> <C> Prospectus Summary....................................................... 4 Risk Factors............................................................. 8 Special Note Regarding Forward-Looking Statements........................ 26 Use of Proceeds.......................................................... 27 Dividend Policy.......................................................... 27 Capitalization........................................................... 28 Dilution................................................................. 29 Selected Consolidated and Combined Financial Data........................ 30 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 31 </TABLE> <TABLE> <CAPTION> Page ---- <S> <C> Industry Background........................................................ 43 Broadband Sports........................................................... 45 Management................................................................. 68 Certain Transactions....................................................... 76 Principal Stockholders..................................................... 77 Description of Capital Stock............................................... 79 Shares Eligible for Future Sale............................................ 83 Underwriters............................................................... 85 Legal Matters.............................................................. 87 Experts.................................................................... 87 Additional Information..................................................... 87 Index to Financial Statements.............................................. F-1 </TABLE> --------------- You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our common stock. In this prospectus, "Broadband Sports," "we," "us," and "our" refer to Broadband Sports, Inc. and our wholly-owned subsidiaries, and not to the underwriters. Unless otherwise stated, all information in this prospectus: . gives effect to a 20-for-1 stock split, which was effective on December 4, 1998; . assumes the redemption upon the closing of this offering of all of our outstanding series A preferred stock for approximately $2.3 million; . assumes the conversion of our outstanding shares of series C preferred stock and our outstanding shares of series B preferred stock into an aggregate of 47,666,663 shares of common stock; . assumes the issuance of 30,389,809 shares of common stock to our Chief Executive Officer in November 1999. . assumes the effectiveness prior to the closing of this offering of an amendment to our certificate of incorporation providing for (i) an authorized capital of 75,000,000 shares of common stock and 5,000,000 shares of preferred stock and (ii) a 1-for- reverse stock split of the outstanding common stock; and . assumes no exercise of the underwriters' over-allotment option. Until , 2000, 25 days after commencement of this offering, all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. References to and information contained on our Web sites do not constitute part of this prospectus. ATHLETE DIRECT is a registered United States service mark of Athlete Direct, Inc., a wholly-owned subsidiary of Broadband Sports. ATHLETE DIRECT, BROADBAND SPORTS, COLLEGE SPORTS XCHANGE, CSX, PRO SPORTS XCHANGE, PSX, ROTONEWS, THE WRITER NETWORK, SPORTSAUTHENTICS.COM, WHERE ATHLETES AND FANS INTERACT and the PSX, Athlete Direct, RotoNews and Broadband Sports Logos are also trademarks and service marks of Broadband Sports. All other brand names and trademarks appearing in this prospectus are the property of their respective holders. 3

PROSPECTUS SUMMARY You should read the following summary together with the more detailed information regarding our company and the common stock being sold in this offering and our Consolidated and Combined Financial Statements and Notes to Consolidated and Combined Financial Statements appearing elsewhere in this prospectus. BROADBAND SPORTS Broadband Sports is a leading Internet provider of original content and commerce for hundreds of individual sports communities. These geographically dispersed communities are composed of fans who follow individual sports, teams and athletes and are characterized by a passionate demand for content and commerce relating to their particular interests. In aggregate, these sports communities generated over $130 billion in revenue according to the most recently published study from the Georgia Institute of Technology. We believe that we are well positioned to target these communities through our development of distinct online media properties, each of which is built around a set of proprietary assets. By leveraging these proprietary assets, we have created a unique and compelling network of content, community and commerce offerings. Through our partnerships with AOL, eBay, Fox, uBid, and Yahoo!, we are able to efficiently reach these various communities with the type of content and commerce offerings they demand and derive revenue from multiple sources. During October 1999, we had over 35 million page impressions across our properties. To date, we have developed four online media properties: . Athlete Direct--Athlete Direct is a leading provider of athlete Web sites. We currently have contracts with more than 200 athletes that provide us with certain exclusive online rights, and we operate the official sites for athletes such as: <TABLE> <S> <C> <C> Troy Aikman Ken Griffey, Jr. Dennis Rodman Drew Bledsoe Tony Gwynn Keith Van Horn Barry Bonds Mia Hamm Michael Waltrip Kobe Bryant Anna Kournikova Bernie Williams Brett Favre Karl Malone Ricky Williams Sergei Fedorov Mike Piazza Steve Young </TABLE> We create Web sites offering unique content and contextually relevant commerce relating to each of our athletes. Our athletes provide interactive content and authentic e-commerce opportunities that are not readily available elsewhere. In addition, these characteristics enable Athlete Direct to create vibrant communities where fans can interact with each other. By aggregating numerous athlete sites under one network, Athlete Direct can consistently provide fans with new, original content and commerce. . Pro Sports Xchange and College Sports Xchange--Pro Sports Xchange (PSX) and its collegiate division, College Sports Xchange (CSX), are leading sources of in-depth team and player information online. PSX covers all MLB, NFL, NBA and NHL sports teams and players and CSX covers every Division I college football and basketball team. Each of these communities is seeking the latest and best inside information, which is not readily available through other online or offline media outlets. PSX is able to provide up-to-date information through its 4

network of over 270 local and regional sports writers, all of whom are under contract to provide us with exclusive online content. . RotoNews--RotoNews is a leading online fantasy sports site offering proprietary news, games and statistical and commissioner services. Because participants invest significant time learning league rules, becoming familiar with the user interface and personalizing their site by entering specific league and player information, we believe that RotoNews creates significant user loyalty and generates frequent visits of extended duration. . SportsAuthentics.com--SportsAuthentics.com is an Internet retailer of sports collectibles and merchandise. We address the limitations of the current distribution channels by providing team and athlete products to fans outside of their local markets and authentic, player/team endorsed products. We are also able to offer unique products which are available exclusively through SportsAuthentics.com. We syndicate our distinctive sports content to various distribution partners, including AOL, eBay, Fox Sports, uBid, and Yahoo!. Together, the distribution of our content and products across multiple platforms enables us to effectively target numerous sports communities, increase brand awareness, promote our product offerings and generate revenues from multiple sources. Our properties enable us to derive revenue from multiple sources, including: . Content syndication. The majority of Internet companies pay significant fees to distribute their content and product offerings online. By contrast, the distinctiveness and in-depth analysis of our content has enabled us to receive significant syndication fees from our distribution partners, such as AOL, Fox Sports and Yahoo!. . Advertising. We offer advertisers the opportunity to target the attractive demographic of sports enthusiasts and associate their brands with high-profile athletes and sports personalities. . Electronic Commerce. We offer sports fans an easy-to-use environment for purchasing authentic player and team related merchandise and collectibles. . Subscription. We offer subscriptions to premium content offerings such as My Baseball Daily, to provide in-depth, original information about teams and players that is generally not available through traditional media sources. In creating and delivering our original content and commerce to distinct sports communities, we obtain efficiencies across our various sports media properties through the common use of our proprietary assets, distribution and technology. We believe we can continue to leverage aspects of our existing assets, distribution and technology to assist in the development of new properties focused on different sports communities. ---------------- We are a Delaware corporation. Our principal executive offices are located at 1640 South Sepulveda Boulevard, Suite 500, Los Angeles, California 90025, and our telephone number is (310) 882-7577. 5

THE OFFERING <TABLE> <C> <S> Common stock offered................................ shares Common stock to be outstanding after this offering.. shares(1) Use of proceeds..................................... To repay outstanding indebtedness of approximately $4.5 million, to redeem outstanding shares of series A preferred stock for $2.3 million, and for general corporate purposes, including the continued development of our Web sites, the enhancement of our technology infrastructure, the expansion into other markets and working capital. We may use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, assets or products. See "Use of Proceeds." Proposed Nasdaq National Market symbol.............. BBND </TABLE> -------------------- (1) Outstanding share information includes 22,801,365 shares of restricted common stock and excludes: (a) an aggregate of 35,294,117 shares of common stock reserved for issuance under our stock option plans, of which options to purchase 29,700,989 shares of common stock were outstanding as of November 15, 1999 at a weighted average price of $ per share, assuming a public offering price of $ ; and (b) warrants to purchase 504,582 shares of common stock at a weighted average price of $0.69 per share. The number of shares of common stock to be outstanding is based on the number of shares outstanding on November 15, 1999. 6

SUMMARY CONSOLIDATED AND COMBINED FINANCIAL INFORMATION The summary consolidated and combined financial data presented below are derived from our financial statements included at the end of this prospectus. The pro forma balance sheet data below reflect the issuance of 30,389,809 shares of common stock to our Chief Executive Officer in November 1999, the issuance of 18,500,000 shares of series C preferred stock in November 1999 and the conversion of these shares and our outstanding shares of series B preferred stock into an aggregate of 47,666,663 shares of common stock upon the closing of this offering. The pro forma as adjusted balance sheet data reflect the application of net proceeds from the sale of our common stock in this offering at an assumed initial public offering price of $ per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses, the repayment of outstanding indebtedness of approximately $4.5 million upon the closing of this offering, and the redemption of the outstanding mandatorily redeemable series A preferred stock for $2.3 million upon the closing of this offering. See "Use of Proceeds" and "Capitalization." <TABLE> <CAPTION> Predecessor Companies Broadband Sports ----------------------------- and Predecessor Broadband Period Companies(1) Sports, Inc. February 1, 1996 -------------------------- ------------- (inception) Nine Months Nine Months Through Year Ended Year Ended Ended Ended December 31, December 31, December 31, September 30, September 30, 1996 1997 1998 1998 1999 ---------------- ------------ ------------ ------------- ------------- (in thousands, except per share data) <S> <C> <C> <C> <C> <C> Consolidated and Combined Statement of Operations: Revenues................ $ 219 $1,874 $3,226 $2,415 $ 5,725 Gross profit............ (195) 574 894 714 1,913 Total operating expenses............... 164 1,277 5,334 3,775 11,757 Loss from operations.... 359 703 4,440 3,061 9,844 Net loss................ 359 700 4,513 3,101 9,889 Historical loss per share basic and diluted (2)............ $ 0.05 Pro forma loss per share basic and diluted (3).. $ 0.04 Weighted average common and common equivalent shares outstanding..... Historical (2)........ 217,038 Pro forma (3)......... 246,204 </TABLE> <TABLE> <CAPTION> As of September 30, 1999 ---------------------------- Pro Forma Actual Pro Forma As Adjusted ------ --------- ----------- (in thousands) <S> <C> <C> <C> Consolidated Balance Sheet Data: Cash and cash equivalents.......................... $9,320 $27,153 $ Working capital.................................... 9,407 27,240 Total assets....................................... 15,409 33,242 Revolving loan due to stockholder.................. 4,468 4,468 Mandatorily redeemable preferred stock............. 2,285 2,285 Total stockholders' equity......................... 6,116 23,948 </TABLE> ------------------- (1) Broadband Sports was incorporated in February 1998 to combine Athlete Direct, Inc. and Pro Sports Xchange, Inc. under common ownership. The combined selected data for the year ended December 31, 1998 were derived by combining the operating data of Athlete Direct and PSX for the two months ended February 27, 1998 with the operating data of Broadband Sports for the 10 months ended December 31, 1998. The combined financial data for the nine months ended September 30, 1998 were derived by combining the operating data of the Predecessor Companies for the two months ended February 27, 1998 with the operating data of Broadband Sports for the seven months ended September 30, 1998. Pro forma financial information has not been presented for the year ended December 31, 1998 and the nine months ended September 30, 1999 because such information would not be materially different than the combined financial data for the same periods. Required unaudited pro forma condensed combined financial information is included elsewhere herein. (2) See notes to the consolidated and combined financial statements for an explanation of the determination of the number of shares used in computing basic and diluted per share amounts. (3) Pro forma loss per share on a historical basis gives effect to the redemption of the series A preferred stock and the issuance and conversion of the series B preferred stock. 7

RISK FACTORS You should carefully consider the risks described below, together with all of the other information included in this prospectus before making an investment decision. If any of the following risks actually occurs, our business, financial condition or operating results could be seriously affected, the trading price of our common stock could decline, and you may lose all or part of your investment. Risks Related To Our Business Because we have operated our business only for a short period of time, it is difficult to evaluate our prospects In 1998, Broadband Sports was incorporated for the purpose of combining Athlete Direct and PSX. Athlete Direct and PSX each commenced operations in 1996 and first recognized revenues in that year. Because we have a limited operating history, you should consider and evaluate our operating prospects in light of the risks and difficulties frequently encountered by relatively new companies, particularly companies in the rapidly evolving online industry. These risks include our ability to do the following: . provide compelling sports-related content and commerce; . maintain existing and develop new relationships with athletes, sports writers, sports personalities and agents, as well as distribution partners and advertisers; . publicly release and successfully market our www.athletedirect.com site; . create an integrated back-end platform across all of our sports media properties and upgrade the related technology infrastructure on a timely basis; . achieve projected levels of online traffic, particularly on our www.athletedirect.com site; . build an electronic commerce infrastructure and increase our fulfillment capabilities; and . further develop and extend our brands. Our future growth will depend substantially on our ability to address these risks and the other risks described below. We cannot assure you that we will succeed in addressing any of these risks and, if we fail to address these risks, our business would be adversely affected. We have a history of losses and anticipate losses for the foreseeable future We have incurred net losses in each quarterly and annual period since we began operations. We incurred a net loss of $4.5 million on a combined basis for the year ended December 31, 1998 and a net loss of $9.9 million for the nine months ended September 30, 1999. As of September 30, 1999, we had an accumulated deficit of $14.2 million. We expect to incur increasing net losses and negative cash flows on a quarterly and annual basis in the foreseeable future. We need to generate significant revenues to achieve profitability, and we cannot assure you that our revenues will be sufficient to achieve this goal. Although we have experienced growth in our revenues in recent periods, these growth rates could decrease in the future and may not be sustainable at all. We have incurred substantial costs to do the following: . acquire, develop and enhance our assets and properties; . create, introduce and enhance our content and product offerings; 8

. acquire, develop and implement our technology infrastructure; and . attract and retain qualified personnel. We intend to continue these efforts and, in addition, to increase spending to do the following: . drive traffic to our current and future online sites; . build an electronic commerce infrastructure and increase our fulfillment capabilities; . integrate all of our properties onto a common technological platform; and . build awareness of our brands. If our revenues grow more slowly than we anticipate or if our operating expenses exceed our expectations, our business would be adversely affected. Fluctuations in our operating results may adversely affect our stock price Some of the factors that could cause our revenues and operating results to fluctuate include the following: . the addition or loss of significant distribution partners, advertisers or athletes; . the introduction by us or by our competitors of new sites, content and products; . positive or negative events or publicity concerning particular sports, leagues, teams or athletes; . the amount and timing of our capital expenditures and other costs related to the expansion of our operations; . seasonal trends in sporting events related to major U.S. sports seasons and events and during the summer and year-end vacation and holiday periods; . changes in demand for, and availability of supply of, merchandise and collectibles; . a higher portion of our revenue mix being derived from advertising and electronic commerce; . amount and mix of merchandise and collectibles sold and advertisements and sponsorships sold and displayed; . technical difficulties or system downtime affecting the online medium generally or on our online sites in particular; and . general economic conditions, as well as economic conditions specific to the online medium, electronic commerce, content syndication, online advertising and the sports industry. Many of our operating expenses are planned or committed in advance in anticipation of future revenues, which are difficult to predict. If our revenues in a particular quarter are lower than we anticipate, we may not be able to reduce spending in that quarter. As a result, any shortfall in revenues could adversely affect our operating results. Because of these factors, we believe that historical and any period-to- period comparisons of our operating results are not necessarily meaningful and you should not view them as indicators of our future performance. If our operating results in any period fall below the expectations of securities analysts and investors, the market price of our shares would likely decline. 9

We may experience difficulties and delays in the release and successful marketing of our www.athletedirect.com site To date, Athlete Direct has been available on the AOL proprietary platform and, on a limited basis, the World Wide Web. Our future growth depends on our ability to publicly release the www.athletedirect.com site on a timely basis. We plan to publicly release the www.athletedirect.com site in the last quarter of 1999. We cannot assure you that we will be successful in publicly releasing and marketing the www.athletedirect.com site on a timely basis, if at all. We do not currently have significant internal marketing resources and we do not have significant experience in planning and executing the major marketing initiative that we will need for the successful public release of the www.athletedirect.com site. Further, we cannot assure you that, once released, the www.athletedirect.com site will attract a significant level of traffic, achieve market acceptance or be free from technical difficulties. Our future growth depends on our relationships with our distribution partners We currently depend on our distribution partners, many of which are actual or potential competitors of ours, for a significant portion of our revenues and traffic. Accordingly, our future success depends on the success of these relationships, and our ability to retain or renew our existing relationships or to attract new relationships on a timely basis and on terms favorable to us. Failure to do so could adversely affect our business. We also rely on the technical infrastructure and cooperation of our partners to support the delivery of our content and the sale of our electronic commerce products. Any failure of the technical infrastructure of our partners or their lack of cooperation could adversely affect our business. We have in the past and may in the future enter into agreements with distribution partners that prohibit us from entering into similar arrangements with other parties. These exclusivity provisions may limit our ability to enter into favorable arrangements with complementary businesses and thereby limit our growth. We cannot assure you that we will achieve the strategic objectives of these relationships or that any of our distribution partners will perform their respective obligations as agreed. We may compete with our current and future distribution partners which may have a material adverse effect on our relations with our distribution partners. To date, we have derived a significant portion of our revenues from a small number of distribution partners. For example, revenues from AOL accounted for approximately 46% of our revenues for the ten months ended December 31, 1998 and approximately 50% of our revenues in the first nine months of 1999. In fiscal 1998, revenues from AOL, Fox Sports and Sportsline.com and, during the first nine months of 1999, revenues from AOL and uBid each accounted for more than 10% of our total revenues. We expect that a limited number of distribution partners will continue to account for a significant percentage of our revenues for the foreseeable future. We need to continue to develop original content to attract our target audience Our future success depends on our ability to continue to develop original content that is interesting and engaging to our target audience. If our content does not reflect the preferences of our target audience, our traffic could decrease or the demographic characteristics of our audience could change. Either of these results would adversely affect our ability to syndicate our content, sell subscriptions for premium content products, conduct electronic commerce and attract advertisers. Our ability to develop original content depends on several factors, including the following: . acquiring and retaining online rights relating to athletes, sports writers and sports personalities; . the level and quality of participation of our athletes, sports writers and sports personalities; 10

. monitoring and adapting to changing consumer preferences; . effectively integrating leading-edge technologies, including broadband technologies; and . the technical expertise and creativity of our production and content staff. We depend on athletes and other sports personalities to provide original content to attract distribution partners, advertisers and traffic We believe that our future success depends on our ability to maintain our existing agreements, and to secure additional agreements with athletes and sports personalities. Our business would be adversely affected by any of the following: . cancellations or non-renewal of these agreements or the renewal of these agreements on terms less favorable to us; . decreased participation by our athletes and sports personalities on our online sites or failure of athletes to perform under their agreements with us; . poor performance of our athletes, or negative events or publicity relating to our athletes or sports personalities; . increased costs of acquiring or retaining athletes and sports personalities; and . increased competition to obtain agreements with athletes and sports personalities. Competition for the online rights related to athletes and sports personalities is intense. Competitors may be able to offer our athletes and sports personalities a better online opportunity. If we lose the services of, or the online rights related to, any high-profile athlete or a significant number of athletes or sports personalities, or if we are unable to continue to attract high-profile athletes or sports personalities, our business would be adversely affected. We cannot assure you that any athlete or sports personality will continue his or her relationship with us, or that our athletes or sports personalities will not decide to affiliate with a competitor. In addition, a relatively small number of sports agents represent a significant proportion of all professional athletes, especially within specific sports. Although we currently work with a number of these agents, adverse changes in our relationships with these sports agents could adversely affect our business. Although these agencies have a fiduciary responsibility to present the athletes they represent with the best opportunities, in the event that any of these agents establishes a strategic relationship or other affiliation with one or more of our competitors or directly provides online content relating to the athletes they represent, our business could be adversely affected. We depend on our network of sports writers for original content We rely on a network of independent sports writers to deliver original and timely sports content. Our future success depends substantially upon our ability to maintain our existing relationships with, and the continued efforts of, our network of sports writers. We will also need to attract and retain additional sports writers. We currently have signed agreements with over 270 sports writers. If we lose the services of a significant number of our sports writers, or if we are unable to continue to attract and retain additional sports writers with appropriate qualifications, the amount of sports news and information we could offer would decrease and our business would be adversely affected. In addition, we believe that certain sports writers may have a large and loyal following among our readers. If we were to lose the services of any one of these sports writers, the demand for our content could 11

decrease. A significant reduction in the demand for our content could adversely affect our business. We cannot assure you that each writer will continue his or her relationship with us, or that our sports writers will not decide to affiliate with a competitor. We generally require our sports writers to provide us with original content for our exclusive online use. However, certain content produced by our sports writers who are also employed by newspapers may be published online by these newspapers and other third parties. We face the risk that certain newspapers may prohibit our sports writers from working for us, which could adversely affect our business. We face possible liability for claims brought by third parties, such as newspapers, asserting ownership of content published by us. Any claim would likely result in our incurring substantial costs and may adversely affect our business. We must effectively implement our branding strategy A growing number of online sites and traditional media companies, some of which already have well-established brands, offer content and products that compete with ours. As a result, we believe we must pursue an aggressive branding strategy in order to attract users, advertisers, distribution partners, athletes, sports writers and sports personalities. We have not yet developed strong brand identities. If we fail to implement our branding strategy effectively and on a timely basis, it would adversely affect our business. We believe the importance of brand recognition will increase as additional companies offer content and products similar to ours. Competition in our industry is growing, and we may have difficulty competing with companies providing content or products similar to ours We compete for users, advertising, syndication, commerce and subscription revenues, as well as for athletes, sports writers, sports personalities and other content providers, with many other entities, such as: . entities that provide access to sports-related content and services (many of which have been established by traditional media companies through Web entities targeted to sports enthusiasts generally), Web search and retrieval services and other high-traffic Web entities; . sports agents, leagues and other third parties that have existing relationships with a number of athletes and sports personalities; . vendors of sports information, merchandise, products and services distributed through online sites and other means, including retail stores, mail, facsimile and private online bulletin board services; and . television, radio and other established media entities that broadcast sporting events. We have and might have in the future business relationships with some of our competitors, some of whom offer access to our services through their own Web sites, and some of our current partners may become competitors in the future. We anticipate that, as the Internet and other interactive distribution systems converge with traditional television broadcasting and cable, significant competition might come from the providers of broadband networks, including sports-oriented cable networks. Some of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do, and may be better able to attract athletes, sports writers, sports personalities and other content providers, as well as distribution partners, agents, advertisers, viewers and consumers. These competitors may be able to respond more quickly than we can to new or emerging technologies and changes in online user preferences and to devote greater 12

resources than we can to building our business. These competitors may develop content and product offerings comparable or superior to ours. Barriers to entry are minimal, and current and potential competitors can launch new online sites at a relatively low cost. We expect that the number of our direct and indirect competitors will increase in the future and this might adversely affect our business, operating results and financial condition. Increased competition could result in lower revenues and loss of users, any of which could materially adversely affect our business, operating results and financial condition. We need to expand our direct advertising sales force and internal marketing team We have limited experience in marketing our properties and selling advertisements and we have relied primarily on third parties to sell advertisements and sponsorships on our online sites and to provide us with marketing support. We have only recently hired a Vice President of Advertising and intend to develop our internal sales force to sell advertising and sponsorships on our online sites. In addition, we intend to continue to expand our internal marketing resources. Expanding our internal sales force and marketing organization involves a number of risks, including the following: . our ability to hire, retain, integrate and motivate sales and marketing personnel; . the length of time necessary for new sales and marketing personnel to become productive; and . the competition we face from other companies in hiring and retaining sales and marketing personnel. Our business would be adversely affected if we do not continue to develop and maintain an effective sales force or expand our marketing team. We will become increasingly dependent on advertising and sponsorship contracts Our failure to sell a significant number of advertisements and sponsorships on, or attract advertisers or sponsors to, our online sites could adversely affect our business and financial results. Most of our advertising contracts for our current online sites have historically been, and we anticipate that in the near term, they will be, short term and/or subject to termination by the advertiser at any time with little notice. Accordingly, the cancellation or deferral of even a limited number of orders could adversely affect our quarterly performance. In addition, although we intend to continue to sell sponsorships of our athletes' sites to existing sponsors of these athletes, we have not sold a significant number of sponsorships to date. The failure to sell a significant number of advertisements and sponsorships would adversely affect our business and financial results. Our ability to attract and retain advertisers and sponsors will depend on several factors, including the following: . our ability to retain athletes, sports personalities and other content providers; . our ability to achieve, demonstrate and maintain a significant level of traffic from attractive demographic groups; . the general market for athlete sponsorships; . the pricing of advertising on other online sites; . the acceptance of non-traditional banner-size inventory, which is the current standard on the AOL platform; . content introductions by us and our competitors; and . our ability to develop and retain a skilled advertising sales force. 13

We may not be able to obtain sufficient supplies of merchandise or collectibles to meet customer demand or to manage inventory effectively The market for sports merchandise and collectibles is highly volatile and subject to consumer trends relating to particular sporting events and the popularity of particular athletes and teams. As a result, demand for certain merchandise and collectibles can often be intense or short-lived. To date, we have sourced only a limited amount of collectibles from our athletes. We cannot assure you that we will be able to procure collectibles from our athletes on a timely basis, if at all. We may be unable to obtain sufficient inventory of merchandise or collectibles to meet demand on a timely basis, if at all. In the future, we intend to maintain a larger inventory of sports merchandise and collectibles. Maintaining a larger inventory subjects us to numerous risks, including funding, obsolescence and price erosion. If we are unsuccessful in effectively managing our inventory, we may be forced to sell our inventory at a discount or loss. Our business success depends on our ability to generate electronic commerce and to develop a scalable commerce platform and distribution capabilities If we do not generate increased revenues from electronic commerce, our growth will be limited and our business could be adversely affected. To generate significant electronic commerce revenues, however, we will have to create or source sports merchandise and collectibles that are appealing to a large number of online consumers. We will also have to continue to create online environments that are conducive to electronic commerce, build or license a sufficiently robust and scalable electronic commerce platform and increase our order fulfillment capabilities. Currently, we have limited distribution and fulfillment experience and our failure to build these capabilities in a timely manner could adversely affect our business. If we fail to meet any of these challenges, our business would be adversely affected. Our collectibles provided by third parties may be subject to fraud We acquire the majority of our collectibles from third-party providers and sell them through our independent auction Web sites and our online sites. We rely on guarantees made by these third-party providers as to the authenticity of these collectibles. Although we do not independently verify the authenticity of third-party collectibles, we guarantee and verify our Athlete Direct collectibles, which are provided to us directly by our athletes. To the extent that any collectible sold by us is not authentic, we could be subject to, among other things, significant negative publicity and litigation. Any negative publicity generated as a result of actual or perceived fraudulent or deceptive collectibles or any litigation, regardless of the merits, could adversely affect our business. Our growth may strain our resources Our business has grown rapidly over the last three years. The number of our employees has grown from approximately 13 employees at May 1, 1998 to 128 employees at November 15, 1999. The scope of our operating and financial systems has also expanded significantly. Our rate of growth places a significant strain on our resources for a number of reasons, including the following: . the need for the continued development of our financial and information management systems; . the need to manage relationships with numerous athletes, sports writers, sports personalities, distribution partners and other third parties; 14

. the difficulties in hiring and retaining skilled personnel necessary to support our business; and . the need to train and manage our growing employee base. The addition of new sports media or other properties and the attention they demand may also strain our management resources. We cannot assure you that we will adequately address these risks, and if we do not, our business could be adversely affected. Our business model depends on us generating revenues for our premium content products To date, only a limited number of online users have been willing to pay for content sold through the Internet. If this market for subscription-based premium content products does not develop or develops more slowly than we expect, our business could be adversely affected. Even if this market develops, it is possible that the renewal rate of our subscribers may be significantly lower than we expect, which could also adversely affect our business. We may not be able to respond to technological changes, and may not remain competitive with others that are better able to respond to these changes quickly The online industry is characterized by rapid technological change, changes in user and customer preferences, frequent new content and product introductions and enhancements, and emerging industry standards. The introduction of new technologies and the emergence of new industry standards and practices can render our existing offerings less attractive and unmarketable. In addition, if we are unable to integrate new technologies and standards effectively, or to introduce new content and products, our ability to remain competitive will be adversely affected. We are in the process of deploying the back-end technology developed in connection with the www.athletedirect.com site across our other online sites. If we fail to deploy this technology successfully, our business would be adversely affected. Our future success will depend, in part, on numerous factors, including our ability to do the following: . enhance our existing offerings; . develop new offerings that address the increasingly sophisticated and varied needs of our prospective users; . respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis; . develop, enhance and improve the responsiveness, functionality and features of our online sites; . provide compelling audio and video content via broadband distribution technologies on a cost-effective and timely basis as these technologies become more widely available; and . license or acquire leading technologies. If we are unable to integrate and capitalize on new technologies and standards effectively, our business could be adversely affected. Any inability to protect our intellectual property rights could adversely affect our business Proprietary rights are important to our success and our competitive position. To protect our proprietary rights, we rely generally on copyright, trademark and trade secret laws, confidentiality agreements with third parties, and license agreements with consultants, vendors and customers. Despite 15

such protection, a third party could, without authorization, copy or otherwise misappropriate information from our database. Our agreements with employees, consultants and others who participate in development activities could be breached. We may not have adequate remedies for any breach, and our trade secrets may otherwise become known or independently developed by competitors. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States, and effective copyright, trademark and trade secret protection may not be available in those jurisdictions. We have applied for registration of several trademarks in the United States and will seek to register additional trademarks as appropriate. We cannot assure you that we will be successful in obtaining the trademarks for which we have applied. Even if these applications mature to registration, they may be successfully challenged by others or invalidated. If the applications do not register because third parties own the trademarks, or if our rights to use the trademarks are challenged by owners of similar rights, the use of the trademarks may be restricted unless we enter into arrangements with the third parties, which may be unavailable on commercially reasonable terms. We also use content from athletes, sports writers, sports personalities and other third parties and it is possible that we could become subject to infringement actions based upon this content. We generally obtain representations as to the origin and ownership of this content; however, this may not adequately protect us. Any of these claims, with or without merit, could subject us to costly litigation and the diversion of our technical and management personnel. There has been substantial litigation in the computer and online industries regarding intellectual property assets. Third parties may claim infringement by us with respect to current and future products, trademarks or other proprietary rights, or we may counterclaim against these parties. Any claims or counterclaims, with or without merit, could be time-consuming, result in costly litigation, divert management's attention, cause product release delays, require us to redesign our products or require us to enter into royalty or licensing agreements, any of which could harm our business. These royalty and licensing agreements, if required, may not be available on terms acceptable to us, if at all. Our business may be restricted by rights of sports leagues and players' associations The operation of our business and our ability to expand into new areas may be restricted by rights of sports leagues and players' associations. Sports leagues, such as the National Football League, typically own league and team trademarks, and we may be required to obtain a license to any of those trademarks that we use. In addition, the leagues also own other rights, such as the rights to display highlights of games, that we may wish to use in our business in the future. License agreements with the leagues for trademarks or other rights, if required, may not be available on terms acceptable to us or at all, and failure to obtain these license agreements could adversely affect our business. Players' associations have certain rights to license athlete names, likenesses and other attributes for groups of athletes, referred to as group licensing rights. We may be required to obtain licenses from players' associations for these group licensing rights in order to conduct certain aspects of our business. If licenses were not available or were not provided on terms acceptable to us and we were required to modify our properties, our business would be adversely affected. We, and agents for some of the athletes with whom we have contracts, have received correspondence from the National Football League Players' Association telling us to cease creating, selling, advertising and promoting Web sites for athletes represented by the players' association. Although we do not believe that there is a basis for the players' association position, if athletes and agents determine not to work with us because of the players' association claims or actions, our business would be adversely affected. 16

The loss of key personnel, or the inability to attract and retain additional, qualified personnel, could adversely affect our business Our future success depends, in significant part, upon the continued services of a relatively small number of key senior management and technical personnel, many of whom have been with us for fewer than 12 months. In particular, Richard D. Nanula, Chairman of the Board and Chief Executive Officer, and Tyler J. Goldman, President, Broadband Studios, are important to our success. We have entered into employment agreements with these officers. However, we cannot assure you that we will be able to retain these or other key employees or that we will be successful in attracting, assimilating and retaining other personnel in the future. In particular, we need to hire qualified marketing, advertising, sales and merchandise personnel as well as engineers to assist with our Web sites and our technology infrastructure. These personnel are in high demand. The loss of any of our key senior management or technical personnel or the inability to attract and retain additional, qualified personnel could adversely affect our business. We face risks associated with maintaining or acquiring new domain names, or protecting current domain names from unauthorized use by third parties We currently hold various Web addresses relating to our assets and brands, including broadbandsports.com, athletedirect.com, psx.com, rotonews.com and sportsauthentics.com. We may not be able to prevent third parties from acquiring Web addresses that are similar to our addresses, which could adversely affect our business. In addition, a number of third parties have registered as domain names the names of a number of our athletes under contract. We may not be able to acquire these Web addresses in a cost- effective manner, or at all, which could adversely affect our business. The acquisition and maintenance of Web addresses generally is regulated by governmental agencies and their designees. The regulation of Web addresses in the United States and in foreign countries and the application of trademark laws to Web addresses is uncertain and subject to change. As a result, we may not be able to acquire or maintain relevant Web addresses in all countries in a cost-effective manner, or at all, where we may conduct business. We may acquire other businesses and we may have difficulty integrating these businesses We have in the past, and may in the future, broaden the scope of our business by acquiring businesses that complement our current content or product offerings, increase our market share or otherwise offer growth opportunities. However, our experience in acquiring and assimilating other companies is limited. We may not be successful in overcoming problems encountered in connection with such acquisitions, and our inability to do so could adversely affect our business. Future acquisitions would expose us to increased risks, including risks associated with the following: . assimilating new operations, technologies, products, sites and personnel; . diverting resources from our existing businesses, sites and technologies; . diverting management's attention from other business concerns; . entry into new markets in which we have limited or no experience; . the inability to generate revenues from new sites sufficient to offset associated acquisition costs; . maintaining uniform standards, controls, procedures and policies; and . the impairment of relationships with employees, distribution partners and other customers as a result of integration of new businesses. 17

Failure to integrate successfully any business, product, technology or personnel would adversely affect our business. Because business acquisitions typically involve significant amounts of intangible assets, our operating results may be adversely affected by amortization of intangible assets acquired. In addition, in the event of future acquisitions or business combinations, we could do the following: . issue equity securities that would dilute current stockholders' percentage ownership in us; . use cash or incur substantial debt; or . assume contingent liabilities. We plan to expand into international markets, which involves additional risks As part of our business strategy, we plan to expand into international markets, which involves additional risks. In marketing our content and products internationally, we will face new competitors. In addition, expansion into international markets will require us to hire and retain additional personnel to execute our international strategy and may require us to create localized versions of our content on a cost effective basis. We cannot assure you that we will be successful in attracting, hiring or retaining the necessary personnel, creating localized versions of our content or marketing or distributing our content or products abroad. Even if we are successful, our international revenues may not offset the expense of establishing and maintaining international operations. To date, we have limited experience in marketing and distributing our content and products internationally. Additional difficulties and risks inherent in doing business internationally include the following: . compliance with a variety of local regulatory requirements and changes in those requirements; . export controls relating to technology, tariffs and other trade barriers; . difficulties in staffing and managing foreign operations; . potentially weaker protection of intellectual property rights in foreign countries, including the possibility that our trademarks will not be available for our use in those countries; . political instability in foreign countries; . fluctuations in foreign currency exchange rates; . longer payment cycles and greater difficulty in collecting accounts receivable; . seasonality in sports outside of the United States; and . potentially adverse tax consequences. Potential Year 2000 problems related to our business systems could adversely affect our business The risks posed by year 2000 issues could adversely affect our business in a number of significant ways. Our information technology system could be substantially impaired or cease to operate due to year 2000 problems. Additionally, the online medium could face serious disruptions arising from the year 2000 problem. We also rely on information technology supplied by third parties and other third party services which are likewise dependent on information technology systems and on their own third party vendors' systems. Year 2000 problems experienced by us or any such third parties could adversely affect our business. 18

We are evaluating our internal systems and contacting our suppliers to ascertain their year 2000 status. However, our own systems may not be year 2000 compliant in a timely manner, and any of our distribution partners may not be year 2000 compliant in a timely manner. In addition, there may be significant interoperability problems among these systems. Consumers may not be able to visit our online sites or purchase our subscription-based premium content and product offerings without serious disruptions arising from the year 2000 problem. Given the pervasive nature of the year 2000 problem, disruptions in other industries and market segments may also adversely affect our business. Finally, year 2000 issues may impact other entities with which we do business, including, for example, those responsible for maintaining telephone and online communications. Accordingly, we cannot predict the effect of the year 2000 problem on such entities. If these other entities fail to take preventive or corrective actions in a timely manner, the year 2000 issue could hurt our business. Risks Related To Our Industry Our business depends on the development and growth of electronic commerce on the Internet and other online media The use of online media for retail transactions, particularly those for sports-related products, is a recent development, and the continued demand and growth of a market for services and products via online media is uncertain. Online media may ultimately prove not to be a viable commercial marketplace for a number of reasons, including the following: . unwillingness of consumers to shift their purchasing from traditional retailers to online retailers; . lack of acceptable transaction and data security; . concern for privacy of personal information; . limitations on access and ease of use; . congestion leading to delayed or extended response times; . inadequate development of infrastructure of online media to keep pace with increased levels of use; and . increased government regulation and taxation. Malfunctions of third-party systems and the strain on our own systems due to increased traffic could adversely affect our business In the past, our online sites have experienced significant increases in traffic when there are significant sports-related events. To the extent the number of users increases, our online sites must accommodate a high volume of traffic. Our online sites have in the past and may in the future experience slower response times or other problems for a variety of reasons. If increases in user traffic result in system interruptions or increases in response time, it could result in a loss of potential or existing users or advertisers and, if sustained or repeated, could reduce the attractiveness of our online sites to users, content providers and advertisers. In addition, our users depend on Internet service providers, and other online service providers for access to our online sites. These providers have experienced significant outages in the past, particularly as a result of increased traffic, and could experience outages, delays and other difficulties due to system failures unrelated to our systems in the future. These types of occurrences could cause users to perceive our online sites as not functioning properly and therefore adversely affect our ability to attract and retain users, content providers and advertisers. 19

Any failure of our network infrastructure could decrease the availability of our content and products The performance, reliability and availability of our online sites are critical to our reputation and ability to attract and retain users, content providers and advertisers. We cannot guarantee that: . we will have uninterrupted access to the Internet; . our users will be able to reach our Internet sites; or . communications via our Internet sites will be secure. Any disruption in Internet access provided by third party services or any failure of third parties to handle higher volumes of Internet users to our Internet sites could adversely affect our business. We do not currently have redundant systems or a formal disaster recovery plan. Despite precautions taken by us and by the companies that now or in the future may host our Internet sites, our system is susceptible to natural and man-made disasters such as earthquakes, fires, floods, power loss and sabotage. Our system is also vulnerable to disruptions from computer viruses and attempts by hackers to penetrate our network security. Services based on sophisticated software and computer systems often encounter development delays and the underlying software may contain undetected errors that could cause system failures when introduced. Any system error or failure that causes interruption in availability of content or an increase in response time could result in a loss of potential or existing advertisers, content providers and users and, if sustained or repeated, could reduce the attractiveness of our content services to such entities or individuals. Expanding our network infrastructure could require substantial financial and operational resources in 2000 and future periods. Our revenues depend on advertisers and sponsors adopting the Internet and other online media as an attractive platform The Internet and other online media have not been available for a sufficient period of time to gauge their effectiveness as advertising platforms when compared with traditional media. There is intense competition among sellers of advertising space on online media, making it difficult to project pricing models or anticipate whether we or our partners will be successful in selling advertising space. Market acceptance of online media as an advertising platform is highly uncertain for a number of reasons, including the following: . lack of widely accepted standards for measuring the extent of Internet traffic; . concerns about privacy and security among users; . the limited acceptance to date of online media for widespread commercial use; and . inadequate development of the network infrastructure and enabling technologies. Tracking and measurement standards for advertising are evolving and create uncertainty about the viability of advertising on the Internet It is important to our advertisers that we accurately measure the size and demographics of our user base and the delivery of advertisements on our online sites. There are currently no widely accepted standards to measure the effectiveness of online media as a platform for attracting audiences or targeting particular demographic groups. If measurement standards do not develop, we may be 20

unable to retain current, or attract new, advertisers. We depend on third parties to provide these measurement services. If they are unable to provide these services in the future, we would be required to perform them ourselves or obtain them from another provider. This could cause us to incur additional costs or cause interruptions in our business while we are replacing these services. We are implementing additional systems designed to record demographic data on our users. If we do not develop these systems successfully, we may not be able to accurately evaluate the demographic characteristics of our users. Companies may not advertise on our online sites or may pay less for advertising if they do not perceive our measurements, or measurements made by third parties, to be reliable. Online security concerns could hinder electronic commerce The need to securely transmit confidential information over online media has been a significant barrier to electronic commerce and electronic communications. Any well-publicized compromise of security could deter people from using the Internet or other online media or from using it to conduct transactions that involve transmitting confidential information, such as credit card numbers. To the extent that our activities or those of third-party contractors involve the storage and transmission of proprietary or personal information, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. Our business may be adversely affected if our security measures do not prevent security breaches, and we cannot assure you that we can prevent any security breaches. In addition, we may be subject to liability for orders placed with fraudulent credit card data even though the associated financial institution approved payment of the orders. Under current credit card practices, a merchant is liable for fraudulent credit card transactions where, as is the case with the transactions we process, the merchant does not obtain a cardholder's signature. Fraudulent use of credit card data in the future could adversely affect our business. In addition, we could be liable for the misuse of personal information. The Federal Trade Commission, the European Union and certain state and local authorities have been investigating certain Internet companies regarding their use of personal information. We could incur additional expenses if new regulations regarding the use of personal information are introduced or if these authorities choose to investigate our privacy practices. We could be subject to liability for online content The nature and breadth of content disseminated by us on our online sites and through our distribution partners could expose us to liability in various areas, including claims relating to: . defamation, libel, negligence, personal injury and other legal theories based on the nature and content of the material we publish or distribute; . copyright or trademark infringement or wrongful action due to the actions of third parties; and . use of third-party content made available through our online sites or through content and material posted by our partners and participants on online pages or in chat rooms and bulletin boards, such as information provided by our sports writers. Because of the large amount of content that is provided to us by our sports writers on a daily basis, it is difficult to verify the originality or accuracy of this information. Any claim would likely result in our incurring substantial costs and would also be a drain on our financial and other resources. In addition, we might experience disruptions in our relationships with our athletes, sports writers, sports personalities, advertisers, distribution partners and other third parties. This could reduce traffic 21

on our online sites, negatively affect our user base, or reduce our revenue from advertising and electronic commerce. Imposition of sales and other taxes on electronic commerce transactions may hinder electronic commerce We generally do not collect sales or other taxes on goods sold on our online sites to users located outside of California. However, one or more states may seek to impose sales tax collection obligations on companies like ours, which engage in or facilitate online commerce. A number of proposals have been made at the state and local level that would impose additional taxes on the sale of goods and services online. Such proposals, if adopted, could substantially impair the growth of electronic commerce and increase our costs and could adversely affect our opportunity to derive financial benefit from electronic commerce. If any state or foreign country were to successfully assert that we should collect sales or other taxes on the exchange of merchandise on our system, our business could be adversely affected. Recently, the Internet Tax Freedom Act was signed into law placing a three-year moratorium on new state and local taxes on Internet commerce. However, future laws may impose taxes or other regulations on Internet commerce, which could adversely affect our business. Imposition of government regulations and other legal uncertainties associated with the online media could adversely affect our business The laws governing online media remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy and libel apply to online media generally. Such legislation could hamper the growth in use of online media generally and decrease the acceptance of online media as a communications and commercial medium, which could have an adverse affect on our business. We cannot assure you that violations of local or other laws will not be alleged or charged by local, state or foreign governments, that we might not unintentionally violate such laws or that such laws will not be modified, or new laws enacted, in the future. In addition, the growing popularity and use of online media has burdened the existing telecommunications infrastructure and many areas with high traffic have begun to experience interruptions in phone service. As a result, certain local telephone carriers have petitioned governmental agencies to regulate Internet service providers and online service providers in a manner similar to long distance telephone carriers and to impose access fees on Internet service providers and online service providers. If any of these petitions or the relief that they seek is granted, the costs of communicating via online media could increase substantially, potentially adversely affecting the growth in the use of online media. Any of these developments could have an adverse effect on our business. Our fantasy contests and services may be subject to state and federal laws governing lotteries and gambling. We can not assure you that our contests will be exempt from such laws or that the applicability of such laws will not adversely affect our business. Risks Associated With Our Offering Because our shares have not been publicly traded before this offering, the initial public offering price may not accurately reflect the trading price of our stock There has not previously been a public market for our common stock. We cannot predict the extent to which investor interest will lead to the development of a permanent trading market or how liquid that market, if developed, might become. The initial public offering price for the shares will be 22

determined by negotiations among us and the representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. Our stock price may be volatile The stock market has experienced significant price and volume fluctuations and the market prices of securities of technology companies, particularly Internet-related companies, have been highly volatile. These fluctuations are often unrelated to the operating performance of particular companies. Our stock price may also be affected by the stock trading prices of other Internet companies. Investors may not be able to resell their shares at or above the initial public offering price. Any shortfall in revenue or other inability to meet the expectations of securities analysts could adversely affect our stock price. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has been instituted against that company. Litigation could result in substantial costs and a diversion of management's attention and resources. We may need additional financing to achieve our business objectives or achieve profitability We currently anticipate that our available cash resources, combined with the net proceeds from this offering, will be sufficient to meet our anticipated working capital and capital expenditure needs for at least the 12 months following the date of this prospectus. Nevertheless, we may need to raise additional funds to maintain and develop our position in the marketplace. We cannot assure you that additional financing will be available on terms favorable to us, or at all. If we cannot obtain needed funds on acceptable terms, or at all, we would be limited in our ability to do the following: . fund more rapid expansion; . develop or enhance existing content or products; . upgrade our technological infrastructure; . build our multiple brands; . respond to competitive pressures; or . acquire complementary products, businesses or technologies. Even if we succeed in raising additional funding, it may have a dilutive effect on the percentage of ownership of our then-current stockholders because we may need to raise these funds by issuing equity or convertible debt securities. Also, any new securities may have rights and privileges senior to the rights of the common stock. Our officers, directors and principal stockholders can exert control over matters requiring stockholder approval After this offering, executive officers, directors and holders of 5% or more of our outstanding common stock will, in the aggregate, beneficially own approximately % of our outstanding common stock. These stockholders will be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying, deterring or preventing a change in control and may make some transactions more difficult or impossible without the support of these stockholders. 23

Provisions in our charter documents and Delaware law may delay or prevent an acquisition of our company Upon the closing of this offering, our certificate of incorporation and bylaws will contain provisions which could make it harder for a third party to acquire us without the consent of our board of directors. For example, if a potential acquiror were to make a hostile bid for us, the acquiror would not be able to call a special meeting of stockholders to remove our board of directors or act by written consent without a meeting. In addition, our board of directors will have staggered terms which makes it difficult to remove them all at once. The acquiror would also be required to provide advance notice of its proposal to remove directors at an annual meeting. The acquiror also will not be able to cumulate votes at a meeting, which will require the acquiror to hold more shares to gain representation on the board of directors than if cumulative voting were permitted. Our board of directors also has the ability to issue preferred stock which would significantly dilute the ownership of a hostile acquiror. In addition, Section 203 of the Delaware General Corporation Law limits business combination transactions with 15% stockholders that have not been approved by the board of directors. These provisions and other similar provisions make it more difficult for a third party to acquire us without negotiation. These provisions may apply even if the offer may be considered beneficial by some stockholders. Our board of directors could choose not to negotiate with an acquiror that it did not feel was in the strategic interests of Broadband Sports. If the acquiror was discouraged from offering to acquire us or prevented from successfully completing a hostile acquisition by the antitakeover measures, you could lose the opportunity to sell your shares at a favorable price. The number of shares that will be eligible for sale in the open market in the near future could depress our stock price If our stockholders sell substantial amounts of our common stock (including shares issued upon the exercise of outstanding options) in the public market following this offering, the market price of our common stock could fall. These sales also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. After this offering, we will have outstanding shares of common stock. Of these shares, the shares being offered hereby are freely tradable. This leaves shares eligible for sale in the public market as follows: <TABLE> <CAPTION> Number of Shares Date ---------------- ---- <S> <C> The date of this prospectus 90 days after the date of this prospectus 180 days after the date of this prospectus At various times after 180 days from the date of this prospectus </TABLE> Our directors, officers and stockholders and substantially all of our optionees have agreed that they will not sell, directly or indirectly, any common stock without the prior written consent of Morgan Stanley and Co. Incorporated for a period of 180 days from the date of this prospectus. Upon the closing of this offering, we intend to file a registration statement to register for resale the shares of common stock reserved for issuance under our stock option plans. We expect this registration to become effective immediately upon filing. As of November 15, 1999, options to purchase a total of 29,700,989 shares of common stock were outstanding, of which 7,768,316 shares will be immediately exercisable upon the closing of this offering. These stock options generally have 24

exercise prices significantly below the assumed initial public offering of our common stock. The possible sale of a significant number of these shares may cause the price of our common stock to fall. Certain stockholders, representing approximately 248,120,386 shares of common stock, have the right, subject to conditions, to include their shares in certain registration statements relating to our securities. By exercising their registration rights and causing a large number of shares to be registered and sold in the public market, these holders may cause the price of the common stock to fall. In addition, any demand to include such shares in our registration statements could have an adverse effect on our ability to raise needed capital. As a new investor, you will experience immediate and substantial dilution The initial public offering price is expected to be substantially higher than the net tangible book value per share of the outstanding common stock immediately after the offering. Investors purchasing common stock in this offering, therefore, will incur immediate dilution of approximately $ in net tangible book value per share, assuming an initial public offering price of $ per share. To the extent that outstanding stock options to purchase common stock are exercised, there will be further dilution. See "Dilution." 25

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under "Risk Factors." These factors may cause our actual results to differ materially from any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward- looking statements after the date of this prospectus to conform such statements to actual results or to changes in our expectations. 26

USE OF PROCEEDS We estimate that our net proceeds from the sale of the shares of common stock in this offering will be approximately $ million, assuming an initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses. If the underwriters exercise their over-allotment option in full, we estimate that our net proceeds will be $ million. We intend to use the net proceeds to: . repay outstanding indebtedness of approximately $4.5 million; and . redeem our outstanding mandatorily redeemable series A preferred stock for $2.3 million. The balance of the net proceeds will be used for general corporate purposes, including the continued development of our Web sites, the enhancement of our technology infrastructure, the expansion into other markets and working capital. We believe the net proceeds of this offering, together with our current cash and cash equivalents, will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. We have not identified specific uses for all such proceeds and accordingly, our management team will have broad discretion in applying the net proceeds. We may use a portion of the net proceeds to acquire or invest in complementary businesses, technologies, assets or products. We currently have no agreements or understandings with respect to any such acquisitions. Pending such uses, we intend to invest the net proceeds of this offering in short-term, interest- bearing, investment grade securities, certificates of deposit or direct guaranteed obligations of the United States. DIVIDEND POLICY We have never declared or paid any cash dividends on our common stock. We intend to retain any future earnings to finance operations and the growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We may incur indebtedness in the future which may prohibit or effectively restrict the payment of dividends, although we have no current plans to do so. Any future determination to pay cash dividends will be at the discretion of our board of directors. 27

CAPITALIZATION The following table sets forth the capitalization as of September 30, 1999: (a) on an actual basis; (b) on a pro forma basis to reflect the issuance of 30,389,809 shares of common stock to our Chief Executive Officer in November 1999, the issuance of 18,500,000 shares of series C preferred stock in November 1999 and the conversion of these shares and our outstanding shares of series B preferred stock into an aggregate of 47,666,663 shares of common stock upon the closing of this offering; (c) on a pro forma basis as adjusted to reflect the following adjustments: . the sale of shares of common stock and the receipt of the net proceeds from the sale of common stock, at an assumed initial public offering price of $ per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses; . the redemption of our outstanding mandatorily redeemable series A preferred stock for $2.3 million; and . the repayment of outstanding indebtedness of $4.5 million, which was outstanding at September 30, 1999. The table below should be read in conjunction with the more detailed financial statements and the related notes, which are included elsewhere in this prospectus: <TABLE> <CAPTION> As of September 30, 1999(1) ------------------------------- Pro Pro Forma Actual Forma As Adjusted -------- -------- ----------- (in thousands) <S> <C> <C> <C> Revolving loan due to stockholder........... $ 4,468 $ 4,468 $ -- -------- -------- ---------- Mandatorily redeemable series A preferred stock, $0.001 par value, 2,000,000 shares authorized actual and pro forma; no shares authorized pro forma as adjusted; 2,000,000 shares issued and outstanding actual; no shares issued and outstanding pro forma and pro forma as adjusted...................... 2,285 2,285 -- -------- -------- ---------- Preferred stock, $0.001 par value, 50,000,000 authorized actual and pro forma, 5,000,000 authorized pro forma as adjusted Series B preferred stock; 34,000,000 authorized actual and pro forma; no shares authorized pro forma as adjusted; 29,166,663 issued and outstanding actual; no shares issued and outstanding pro forma and pro forma as adjusted................. 16,519 -- -- Series C preferred stock; no shares authorized actual; 20,000,000 shares authorized pro forma and pro forma as adjusted; no shares issued and outstanding actual, pro forma, and pro forma as adjusted.................................. -- -- -- Common stock, $0.001 par value, 300,000,000 shares authorized, 217,037,500 shares issued and outstanding, actual; 247,697,913 shares issued and outstanding, pro forma; 75,000,000 shares authorized, issued and outstanding, pro forma as adjusted..... 217 295 Additional paid-in capital.................. 6,107 55,582 Receivable from stockholder................. -- (15,202) Deferred compensation....................... (2,483) (2,483) Accumulated deficit......................... (14,244) (14,244) -------- -------- ---------- Total stockholders' equity................ 6,116 23,948 -------- -------- ---------- Total capitalization.................... $ 12,869 $ 30,701 $ ======== ======== ========== </TABLE> ------------------ (1) The preceding table excludes (a) an aggregate of 35,294,117 shares of common stock reserved for issuance under our stock option plans, of which options to purchase 21,667,489 shares of common stock were outstanding as of September 30, 1999 at a weighted average exercise price of $ per share, assuming a public offering price of $ , and (b) a warrant to purchase 282,916 shares of common stock at an exercise price price of $0.60 per share as of September 30, 1999. 28

DILUTION Our pro forma net tangible book value as of September 30, 1999 was approximately $20.8 million or $0.07 per share. Net tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and divided by the total number of shares of common stock outstanding, after giving effect to the automatic redemption of the mandatorily redeemable series A preferred stock, the issuance of 18,500,000 shares of series C preferred stock in November 1999 and the conversion of these shares and our outstanding shares of series B preferred stock into an aggregate of 48,666,663 shares of common stock upon the closing of this offering and the issuance of 30,389,809 shares of common stock to our Chief Executive Officer in November 1999. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the net tangible book value per share of common stock immediately after the closing of this offering. After giving effect to the sale of the shares of common stock offered by us at an assumed initial public offering price of $ per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value at September 30, 1999 would have been approximately $ million or $ per share of common stock. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to new investors of common stock. The following table illustrates this dilution on a per share basis: <TABLE> <S> <C> <C> Assumed initial public offering price per share................ $ Pro forma net tangible book value per share as of September 30, 1999.................................................... $( ) Increase in pro forma net tangible book value per share attributable to new investors............................... ----- Pro forma net tangible book value per share after this offering...................................................... ---- Dilution per share to new investors............................ $ ==== </TABLE> The following table summarizes, on an as adjusted basis to give effect to the offering at an assumed initial public offering price of $ per share, before deducting estimated underwriting discounts and commissions and estimate offering expenses, as of September 30, 1999, the differences between the existing stockholders and new investors with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid: <TABLE> <CAPTION> Shares Purchased(1) Total Consideration ----------------- ---------------------- Average Price Number Percentage Amount Percentage Per Share ------ ---------- --------- ----------- ------------- <S> <C> <C> <C> <C> <C> Existing stockholders... % $ % $ New investors........... --- ----- --------- ---------- Total................. 100.0% $ 100.0% === ===== ========= ========== </TABLE> --------------------- (1) The preceding table excludes (a) an aggregate of 35,294,117 shares of common stock reserved for issuance under our stock option plans, of which options to purchase 21,667,489 shares of common stock were outstanding as of September 30, 1999 at a weighted average exercise price of $ per share, assuming a public offering price of $ , and (b) a warrant to purchase 282,916 shares of common stock at an exercise price of $0.60 per share. 29

SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA The statement of operations data set forth below for the period from inception (February 1, 1996) through December 31, 1996, the fiscal year ended December 31, 1997, the two months ended February 27, 1998 and the 10 months ended December 31, 1998, and the selected balance sheet data as of December 31, 1997 and 1998 have been derived from our financial statements, which have been audited by Ernst & Young LLP, independent auditors, included elsewhere in this prospectus. The selected combined financial data for the year ended December 31, 1998 were derived by combining the operating data of Athlete Direct and PSX, which are together referred to in connection with our financial statements as the "Predecessor Companies," for the two months ended February 27, 1998 with the operating data of Broadband Sports for the 10 months ended December 31, 1998. The financial data for the nine months ended September 30, 1999 and the seven months ended September 30, 1998 and the selected balance sheet data as of September 30, 1999 are derived from unaudited financial statements appearing elsewhere in this prospectus. The combined selected financial data for the nine months ended September 30, 1998 were derived by combining the operating data of the Predecessor Companies for the two months ended February 27, 1998 with the operating data of Broadband Sports for the seven months ended September 30, 1998. The combined balance sheet data as of December 31, 1996 are derived from financial statements of the Predecessor Companies that are not included herein. Pro forma financial information has not been presented for the year ended December 31, 1998 and the nine months ended September 30, 1999 because such information would not be materially different than the combined financial data for the same periods. Required unaudited pro forma condensed combined financial information is included elsewhere herein. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position for these periods. The results for the nine months ended September 30, 1999 are not necessarily indicative of results that may be expected for the entire year. You should read the selected consolidated and combined financial and operating data set forth below in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the notes included elsewhere in this prospectus. <TABLE> <CAPTION> Predecessor Companies ------------------------------------------ The period February 1, 1996 Broadband Broadband Combined (inception) Two months Ten months Combined Seven months Nine months through Year ended ended ended Year ended ended ended December 31, December 31, February 27, December 31, December 31, September 30, September 30, 1996 1997 1998 1998 1998 1998 1998 ---------------- ------------ ------------ ------------ ------------ ------------- ------------- (in thousands, except per share data) <S> <C> <C> <C> <C> <C> <C> <C> Consolidated and Combined Statement of Operations Data: Revenues........... $ 219 $ 1,874 $ 507 $ 2,719 $ 3,226 $ 1,908 $ 2,415 Cost of revenues... 414 1,300 296 2,036 2,332 1,405 1,701 ----- ------- ----- ------- ------- ------- ------- Gross profit (loss)............ (195) 574 211 683 894 503 714 Operating expenses: Sales and marketing........ 4 154 69 592 661 209 278 Product development...... 8 22 9 137 146 85 94 General and administrative... 97 672 136 1,537 1,673 1,067 1,203 Depreciation...... 3 15 4 43 47 26 30 Amortization of goodwill......... -- -- -- 244 244 170 170 Amortization of deferred stock compensation and deferred incentives....... 52 414 150 2,413 2,563 1,850 2,000 ----- ------- ----- ------- ------- ------- ------- Total operating expenses....... 164 1,277 368 4,966 5,334 3,407 3,775 ----- ------- ----- ------- ------- ------- ------- Operating loss..... (359) (703) (157) (4,283) (4,440) (2,904) (3,061) Interest income.... -- 3 -- -- -- -- -- Interest and other expense........... -- -- -- (73) (73) (41) (41) ----- ------- ----- ------- ------- ------- ------- Net loss........... $(359) $ (700) $(157) $(4,356) $(4,513) $(2,945) $(3,102) ===== ======= ===== ======= ======= ======= ======= Historical loss per share basic and diluted (1)....... $ 0.02 $ 0.01 Pro forma loss per share basic and diluted (2)....... $ 0.02 $ 0.01 Weighted average common and common equivalent shares outstanding....... Historical (1).... 217,038 217,038 Pro forma (2)..... 246,204 246,204 <CAPTION> Broadband Nine months ended September 30, 1999 ------------- <S> <C> Consolidated and Combined Statement of Operations Data: Revenues........... $ 5,725 Cost of revenues... 3,812 ------------- Gross profit (loss)............ 1,913 Operating expenses: Sales and marketing........ 4,488 Product development...... 714 General and administrative... 4,098 Depreciation...... 268 Amortization of goodwill......... 269 Amortization of deferred stock compensation and deferred incentives....... 1,920 ------------- Total operating expenses....... 11,757 ------------- Operating loss..... (9,844) Interest income.... 199 Interest and other expense........... (244) ------------- Net loss........... $(9,889) ============= Historical loss per share basic and diluted (1)....... $ 0.05 Pro forma loss per share basic and diluted (2)....... $ 0.04 Weighted average common and common equivalent shares outstanding....... Historical (1).... 217,038 Pro forma (2)..... 246,204 </TABLE> <TABLE> <CAPTION> Predecessor Companies Broadband Sports, Inc. ------------- ----------------------- December 31, ------------- Dec. 31, September 30, 1996 1997 1998 1999 ------ ------ --------- ------------- (in thousands) <S> <C> <C> <C> <C> Consolidated and Combined Balance Sheet Data: Cash and cash equivalents............... $ 258 $ 53 $ 213 $ 9,320 Working capital ........................ $ 209 $ 587 $ 403 $ 9,407 Total assets............................ $1,172 $1,971 $2,356 $15,409 Revolving loan due to stockholder....... $ -- -- $1,998 $ 4,468 Mandatorily redeemable series A preferred stock........................ $ -- -- $2,150 $ 2,285 Total stockholders' equity.............. $ 909 $1,631 $2,388 $ 6,116 </TABLE> ------------------ (1) See notes to the consolidated and combined financial statements for an explanation of the determination of the number of shares used in computing basic and diluted per share amounts. (2) Pro forma loss per share on a historical basis takes effect for the redemption of the series A preferred stock and the issuance and conversion of the series B preferred stock. 30

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS You should read the following discussion in conjunction with our consolidated financial statements and the notes to those statements included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including, but not limited to, those discussed in "Risk Factors" and elsewhere in this prospectus. Overview We are a leading online provider of athlete sites and original, in-depth team and player content targeted at distinct communities of sports fans. We capitalize on the growing worldwide popularity of sports and the emergence of the Internet by developing sports media properties that offer compelling content and commerce. These properties are based on our proprietary assets, which include multi-year contracts with over 200 athletes and sports personalities that provide us with certain exclusive online rights, as well as a network of over 270 local and regional sports writers. We have selected a number of distribution partners, including AOL, eBay, Fox Sports, uBid and Yahoo!, to target a broad range of sports communities effectively. To augment the distribution of our content and products, we intend to pursue additional distribution partners and to publicly release the www.athletedirect.com site. Broadband Sports was incorporated in February 1998 to combine Athlete Direct, Inc. and Pro Sports Xchange, Inc. under common ownership. Athlete Direct began operations in September 1996. Pro Sports Xchange LLC began operations in February 1996. Broadband Sports purchased all of the outstanding stock of the Predecessor Companies in February 1998 for cash. In February 1999, Broadband Sports acquired the assets of Manna Mir Research, Inc., which owned and operated the fantasy sports site, rotonews.com. These assets were contributed to a newly formed subsidiary, RotoNews, Inc. In March 1999, Broadband Sports formed a new subsidiary, SportsAuthentics.com, Inc., to market and distribute sports-related merchandise and collectibles. We have only a limited operating history upon which you can evaluate our business and prospects. You must consider our prospects in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. These risks include, among others, our ability to provide compelling sports-related content and products, maintain existing and develop new strategic relationships, publicly release the www.athletedirect.com site, create an integrated common back-end platform, achieve and maintain projected levels of online traffic, build an electronic commerce infrastructure, increase our fulfillment capabilities and extend our brands. We cannot assure you that we will be successful in addressing these risks, and our failure to do so could have a material adverse effect on our business and financial results. See "Risk Factors--Because we have operated our business only for a short period of time, it is difficult to evaluate our prospects." We have incurred significant net losses and negative cash flows from operations since inception, and as of September 30, 1999, we had an accumulated deficit of approximately $14.2 million. We intend to make significant financial investments in developing new properties, content and product offerings, enhancing our technology infrastructure and building our brands and increasing our traffic through marketing and promotion. As a result, we believe that we will incur losses from operations for the foreseeable future. See "Risk Factors--We have a history of losses and anticipate losses for the foreseeable future." 31

In addition, our results of operations may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control. These factors include, among others, seasonal trends in sporting events; publicity concerning particular sports, leagues, team or athletes; changes in distribution partners, advertisers or athletes; new sites, content or products introduced by us or by our competition; mix of revenues from content syndication, electronic commerce, advertisements and subscriptions; the amount and timing of capital expenditures and other costs; changes in demand for and supply of merchandise and collectibles; and general economic conditions. If our operating results in any period fall below the expectations of securities analysts and investors, the market price of our share would likely decline. See "Risk Factors--Fluctuations in our operating results may adversely affect our stock price." Revenues. We currently derive revenues from four sources: content syndication, advertising, electronic commerce and subscriptions. Content syndication revenues represent licensing of original content and programming to our distribution partners and are recognized over the period of the distribution agreements as we deliver such content and programming. In addition to cash payments, our content syndication revenues include guaranteed promotion and positioning for certain of our product and content offerings. Advertising revenues represent the sale of banner advertisements and sponsorships and are recognized ratably over the period in which they are displayed, provided that no significant obligations remain and collection of the resulting receivable is probable. Electronic commerce revenues represent the sale of sports-related merchandise and collectibles and are recognized once the product has been shipped and collection of the resulting receivable is probable. Subscription revenues represent customer subscriptions to our premium content offerings and are recognized ratably over the subscription period, which is typically a professional sports season. Subscriptions are generally billed in advance and charged directly to customers' credit cards. Deferred revenues relate to subscription fees that have been collected but for which revenues have not yet been recognized. We generate revenues from our four current properties: . Athlete Direct launched its initial site on the AOL platform in the third quarter of 1996 and recognized its first content syndication revenues from AOL in that quarter. Since the third quarter of 1996, Athlete Direct has maintained a distribution relationship with AOL, which was exclusive through March 1999. In 1999, Athlete Direct entered into an agreement with Yahoo! to syndicate its content to Yahoo! Sports. In addition, Athlete Direct currently sells collectibles through eBay. To date, Athlete Direct has derived revenues primarily from content syndication and, to a lesser extent, from the sale of advertising and electronic commerce. To augment the distribution of our content and products, we intend to publicly release the www.athletedirect.com site in the last quarter of 1999. We cannot assure you that we will be able to release the www.athletedirect.com site on a timely basis, if at all. "See Risk Factors--We may experience difficulties and delays in the release and successful marketing of our www.athletedirect.com site." . PSX initially recognized revenues from content syndication in the first quarter of 1996. During 1997, PSX entered into syndication relationships that limited distribution for its content to three distribution partners. These distribution restrictions expired in December 1998. Currently, PSX's distribution partners include AOL, AOL.com, Fox Sports and Yahoo!. PSX derives revenues primarily from content syndication and, to a lesser extent, the sale of subscriptions to its premium content offerings. Subscriptions are sold to consumers through the psx.com Web site and through our various distribution partners. 32

. RotoNews derives substantially all of its revenues from the sale of banner advertisements on its Web site, rotonews.com. In addition to its own site, RotoNews' content and commissioner services are distributed primarily through sites targeted at the fantasy sports market. . SportsAuthentics.com derives electronic commerce revenues from the sale of sports merchandise and collectibles. SportsAuthentics.com distributes products both through its distribution relationship with uBid and its own branded online stores on the World Wide Web and on the AOL platform. Cost of Revenues. Our cost of revenues includes compensation and benefits for editorial and operations personnel, contractual royalty fees to content providers including athletes, sports writers, and sports personalities and telecommunications, Internet access and computer-related expenses for the support and delivery of our services. Cost of revenues also includes the cost of merchandise and collectibles sold and the royalty and other payments paid to certain partners and athletes based on a percentage of the revenues or gross profits generated. Operating Expenses. Sales and Marketing. Sales and marketing expenses consist of advertising and promotional expenditures, salaries and related expenses for personnel engaged in marketing, advertising sales, customer service, fulfillment and public relations. Amounts earned by content providers including athletes, sports writers, and sports personalities in excess of the contractual royalty are included in sales and marketing expenses. Product Development. Product development expenses consist primarily of employee compensation and benefits, and consulting and development fees required to enhance existing and develop new product and content offerings. General and Administrative. General and administrative expenses consist of salary and related costs for general corporate functions as well as professional service fees and facilities expenses. Depreciation. Depreciation expenses consist of the depreciation of property and equipment. Amortization. Amortization expenses consist of the amortization of goodwill associated with the acquisitions of Athlete Direct and PSX in February 1998 and RotoNews in February 1999 and deferred stock compensation and incentive costs. We intend to recognize $3.3 million of additional amortization expense related to deferred compensation and incentives existing as of September 30, 1999 as follows: <TABLE> <CAPTION> Amount Year (in millions) ---- ------------- <S> <C> 1999........................................................... $0.5 2000........................................................... 1.5 2001........................................................... 0.8 2002........................................................... 0.4 2003........................................................... 0.1 ---- Total........................................................ $3.3 ==== </TABLE> Interest Expense. Interest expense consists of interest incurred on our existing revolving loan due to stockholder. 33

Interest Income. Interest income represents interest earned on cash and cash equivalents and marketable securities. Income Taxes. No provision for Federal and state income taxes has been recorded as we incurred net operating losses for each period presented. As of September 30, 1999, we had approximately $9.0 million of net operating loss carryforwards for Federal income tax purposes, available to offset future taxable income. Due to the change in our ownership interests in connection with this offering and prior private placements, future utilization of the net operating loss carryforwards may be subject to certain annual limitations. These net operating losses begin to expire in 2009. Given our limited operating history, losses incurred to date and the difficulty in accurately forecasting our future results, we do not believe that the realization of the related deferred income tax assets meets the criteria required by generally accepted accounting principles and, accordingly, a full 100% valuation allowance has been recorded to reduce the deferred income tax assets to zero. See Note 7 of Notes to Consolidated and Combined Financial Statements. Results of Operations The following tables set forth statement of operations data for the periods indicated as a percentage of net revenues. Since we began operations on February 27, 1998, in order to provide a full year of operating results, we combined the two months of 1998 during which the Predecessor Companies had operations with Broadband Sports. The following table sets forth our combined statement of operations data and the Predecessor Companies statement of operations data for the periods indicated as a percentage of net revenues: <TABLE> <CAPTION> Period from Two Months Ten Months Combined February 1, 1996 Year ended ended ended Year ended to December 31, December 31, February 27, December 31, December 31, 1996 1997 1998 1998 1998 ---------------- ------------ ------------ ------------ ------------ <S> <C> <C> <C> <C> <C> Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues........ 189.0 69.4 58.4 74.9 72.3 ------ ------ ----- ------ ------ Gross profit (loss)..... (89.0) 30.6 41.6 25.1 27.7 Operating expenses: Sales and marketing.... 1.9 8.2 13.8 21.8 20.5 Product development.... 3.6 1.2 1.7 5.0 4.5 General and administrative........ 44.4 35.9 26.8 56.5 51.9 Depreciation........... 1.3 0.8 0.7 1.6 1.5 Amortization of goodwill.............. -- -- -- 9.0 7.5 Amortization of deferred stock compensation and deferred incentives... 24.0 22.0 29.6 88.7 79.4 ------ ------ ----- ------ ------ Total operating expenses............... 75.2 68.1 72.6 182.6 165.3 ------ ------ ----- ------ ------ Operating loss.......... 164.2 37.5 31.0 157.5 137.6 Interest and other expense................ (0.1) (0.1) -- 2.7 2.2 ------ ------ ----- ------ ------ Net loss................ 164.1 37.4 31.0 160.2 139.8 ====== ====== ===== ====== ====== </TABLE> 34

<TABLE> <CAPTION> Combined Two months Seven months Nine months Nine months ended ended ended ended February 27, September 30, September 30, September 30, 1998 1998 1998 1999 ------------ ------------- ------------- ------------- <S> <C> <C> <C> <C> Revenues................ 100.0% 100.0% 100.0% 100.0% Cost of revenues........ 58.4 73.6 70.4 66.6 ------ ------ ----- ----- Gross profit (loss)..... 41.6 26.4 29.6 33.4 Operating expenses: Sales and marketing.... 13.8 11.0 11.6 78.4 Product development.... 1.7 4.4 3.9 12.5 General and administrative........ 26.8 55.9 49.8 71.6 Depreciation........... 0.7 1.3 1.2 4.7 Amortization of goodwill.............. -- 8.9 7.0 4.7 Amortization of deferred stock compensation and deferred incentives... 29.6 97.0 82.8 33.5 ------ ------ ----- ----- Total operating expenses............... 72.6 178.5 156.3 205.4 ------ ------ ----- ----- Operating loss.......... 31.0 152.1 126.7 172.0 Interest and other expense................ -- 2.1 1.7 0.7 ------ ------ ----- ----- Net loss................ 31.0 154.2 128.4 172.7 ====== ====== ===== ===== </TABLE> Nine Months Ended September 30, 1998 and 1999 Revenues. Revenues increased $3.3 million, to $5.7 million, or 137%, for the nine months ended September 30, 1999 from $2.4 million for the nine months ended September 30, 1998. The increase in revenues was primarily the result of increased content syndication revenues from additional distribution partners and increased advertising and electronic commerce revenues due to higher traffic, the introduction of additional content offerings and new distribution relationships. Cost of Revenues. Cost of revenues increased $2.1 million to $3.8 million for the nine months ended September 30, 1999 from $1.7 million for the nine months ended September 30, 1998. Our gross margin increased to 33.4% from 29.6% for the nine months ended September 30, 1999 from the nine months ended September 30, 1998. The decrease in cost of revenues as a percentage of total revenues was primarily attributable to growth in higher margin syndication and advertising revenues for the 1999 period as compared to the similar 1998 period. The increase in cost of revenues on an absolute basis was primarily the result of increased headcount, particularly in editorial and operations, as well as increases in revenue and gross profit sharing with our athletes and third-party content providers. Sales and Marketing. Sales and marketing expenses increased $4.2 million to $4.5 million for the nine months ended September 30, 1999 from $278,000 for the nine months ended September 30, 1998. This increase was primarily attributable to additional marketing fees paid to distribution partners, an increase in amortization of advances paid to athletes, increased advertising and marketing activity and the hiring of additional sales and marketing staff. We intend to pursue a branding and marketing campaign in connection with the public release of athlete sites and the www.athletedirect.com site and in support of our other properties. Accordingly, we expect sales and marketing expenses to increase in absolute dollars in the future. Product Development. Product development expenses increased $620,000 to $714,000 for the nine months ended September 30, 1999 from $94,000 for the nine months ended September 30, 1998. This increase was primarily attributable to the costs of additional personnel and related expense associated with the development of the www.athletedirect.com site, network operations and other new programming initiatives. We intend to invest additional resources on the further development of our 35

online sites, upgrades to our technological infrastructure, integration of a common back-end platform across all our properties, and other product development efforts in the future. As a result, we expect product development expenses to increase in absolute dollars in the future. General and Administrative. General and administrative expenses increased $2.9 million to $4.1 million for the nine months ended September 30, 1999 from $1.2 million for the nine months ended September 30, 1998. This increase in general and administrative expenses was primarily attributable to headcount and related expenses associated with hiring of additional personnel and increased professional services fees. We expect general and administrative costs to increase in absolute dollars in the future as we continue to hire personnel and build our operational infrastructure. Depreciation. Depreciation expenses increased $239,000 to $268,000 for the nine months ended September 30, 1999 from $29,000 for the nine months ended September 30, 1998. The increase in depreciation was primarily due to increases in facilities, equipment and related costs associated with increases of personnel in all areas. We expect depreciation expenses to continue to increase as we invest in additional property and equipment in the future. Amortization. Amortization expenses increased $19,000 to $2.19 million for the nine months ended September 30, 1999 from approximately $2.17 million for the nine months ended September 30, 1998. This increase in amortization was primarily due to increased amortization of goodwill associated with the acquisition of RotoNews. To the extent that we acquire businesses or technologies in the future, we may be required to amortize a significant amount of intangible assets related to these acquisitions, which could adversely affect our operating results. In addition, we intend to sign additional athletes, sports writers and sports personalities and we may incur additional deferred incentives. Interest Expense. Interest expense increased $209,000 to approximately $244,000 for the nine months ended September 30, 1999 from approximately $35,000 for the nine months ended September 30, 1998. The increase in interest expense reflects a higher outstanding balance on our revolving loan due to stockholders during the nine months ended September 30, 1999. Interest Income. Interest income increased $200,000 for the nine months ended September 30, 1999 from zero for the nine months ended September 30, 1998. The Company generated this income by investing the proceeds from the series B preferred stock issued during the second quarter of 1999. Inception Period and Years Ended December 31, 1997 and 1998 Revenues. Revenues increased $1.7 million, or 757%, to $1.9 million for the year ended December 31, 1997 from $219,000 for the period from inception to December 31, 1996, and increased $1.4 million, or 72%, to $3.2 million for the year ended December 31, 1998 from $1.9 million for the year ended December 31, 1997. The increase from 1996 to 1997 was primarily due to increased content syndication revenues as a result of additional distribution partners and earning an entire year of revenues in December 31, 1997. The increase from 1997 to 1998 was primarily the result of additional content syndication revenues and, to a lesser extent, increased advertising and electronic commerce revenues which were the result of increased traffic and additional content offerings. Cost of Revenues. Cost of revenues increased $900,000 to $1.3 million for the period ended December 31, 1997 from $414,000 for the period from inception to December 31, 1996, and increased $1 million to $2.3 million for the year ended December 31, 1998 from $1.3 million for the year ended December 31, 1997. Our gross margin decreased from 30.6% for the twelve months ended December 31, 1997 to 27.7% for the similar period ended December 31, 1998. These increases in cost 36

of revenues were primarily the result of increased hiring, particularly in editorial and operations staff, as well as increases in revenue and gross profit sharing with athletes and third party content providers. Sales and Marketing. Sales and marketing expenses increased $150,000 to $154,000 for the year ended December 31, 1997 from $4,000 for the period from inception to December 31, 1996, and increased $507,000 to $661,000 for the year ended December 31, 1998 from $154,000 for the year ended December 31, 1997. The increase in sales and marketing expenses in 1998 from 1997 and 1996 was primarily attributable to increases in our sales and marketing staffs and payments to non-employees. Product Development. Product development expenses increased $14,000 to $22,000 for the year ended December 31, 1997 from $8,000 for the period from inception to December 31, 1996, and increased $124,000 to $146,000 for the year ended December 31, 1998 from $22,000 for the year ended December 31, 1997. The increase in product development expenses in 1998 from 1997 and 1996 was primarily attributable to hiring additional technical personnel in 1998 and in 1997. General and Administrative. General and administrative expenses increased $575,000 to $672,000 for the year ended December 31, 1997 from $97,000 for the period from inception to December 31, 1996, and increased $1.0 million to $1.7 million for the year ended December 31, 1998 from $672,000 for the year ended December 31, 1997. The increases in general and administrative expenses in each period were primarily attributable to salary and related expenses for additional personnel, increased costs related to a new facility and an increase in professional fees. Depreciation. Depreciation expenses increased $12,000 to $15,000 for the year ended December 31, 1997 from $3,000 for the period from inception to December 31, 1996, and increased $32,000 to $47,000 for the year ended December 31, 1998 from $15,000 for the year ended December 31, 1997. The increases in depreciation expenses in 1998 from 1997 and 1996 were due to the purchase of additional property and equipment. Amortization. Amortization expenses increased $361,000 to $414,000 for the year ended December 31, 1997 from $52,000 for the period from inception to December 31, 1996, and increased $2.4 million to $2.8 million for the year ended December 31, 1998 from $414,000 for the year ended December 31, 1997. The increases in amortization expenses in 1998 from 1997 and 1996 were primarily due to amortization of deferred stock compensation and incentives and the amortization of goodwill related to our acquisition of PSX. Interest Expense. We incurred no interest expense during the period from inception to December 31, 1996 and the year ended December 31, 1997. Interest expense was approximately $67,000 for the year ended December 31, 1998. The increase in interest expense in 1998 from 1997 and 1996 was due to the initial use of our revolving loan, which became available in the first quarter of 1998. 37

Quarterly Results of Operations The following table sets forth the unaudited quarterly statement of operations data for each of the six quarters ended September 30, 1999 and as a percentage of revenues for our six most recent quarters. The unaudited quarterly information has been derived from our unaudited financial statements and, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the information for the periods covered. The quarterly data should be read in conjunction with our financial statements and related notes. The operating results for any quarter are not necessarily indicative of the operating results for any future period. <TABLE> <CAPTION> Three Months Ended --------------------------------------------------------------------- June 30, September 30, December 31, March 31, June 30, September 30, 1998 1998 1998 1999 1999 1999 -------- ------------- ------------ --------- -------- ------------- (in thousands) <S> <C> <C> <C> <C> <C> <C> Statement of Operations Data: Revenues................ $ 778 $ 890 $ 811 $ 1,553 $ 1,758 $ 2,414 Cost of revenues........ 545 712 631 786 1,371 1,655 ----- ------- ------- ------- ------- ------- Gross profit............ 233 178 180 767 387 759 Operating expenses: Sales and marketing... 110 70 382 977 1,331 2,180 Product development... 40 40 51 195 272 247 General and administrative....... 301 584 449 814 1,473 1,811 Depreciation.......... 9 15 17 30 87 151 Amortization of goodwill ............ 72 73 74 80 94 95 Amortization of deferred stock compensation and deferred incentives.. 280 463 585 694 690 536 ----- ------- ------- ------- ------- ------- Total operating expenses............ 812 1,245 1,558 2,790 3,947 5,020 ----- ------- ------- ------- ------- ------- Operating loss.......... (579) (1,067) (1,378) (2,023) (3,560) (4,261) Interest income......... -- -- -- -- 43 156 Interest and other expenses............... (19) (18) (33) (54) (91) (99) ----- ------- ------- ------- ------- ------- Net loss................ $(598) $(1,085) $(1,411) $(2,077) $(3,608) $(4,204) ===== ======= ======= ======= ======= ======= As a Percentage of Revenues: Revenues................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of revenues........ 70.1 80.0 77.8 50.6 78.0 68.6 ----- ------- ------- ------- ------- ------- Gross profit............ 29.9 20.0 22.2 49.4 22.0 31.4 Operating expenses: Sales and marketing... 14.1 7.9 47.1 62.9 75.7 90.3 Product development... 5.1 4.5 6.3 12.5 15.5 10.2 General and administrative....... 38.7 65.6 55.4 52.4 83.8 75.0 Depreciation.......... 1.2 1.7 2.1 1.9 5.0 6.3 Amortization of goodwill............. 9.3 8.2 9.1 5.2 5.3 3.9 Amortization of deferred stock compensation and deferred incentives.. 36.0 52.0 72.1 44.7 39.2 22.2 ----- ------- ------- ------- ------- ------- Total operating expenses............ 104.4 139.9 192.1 179.6 224.5 207.9 ----- ------- ------- ------- ------- ------- Operating loss.......... (74.5) (119.9) (169.9) (130.2) (202.5) (176.5) Interest income......... -- -- -- -- 2.4 6.5 Interest and other expenses............... (2.4) (2.0) (4.1) (3.5) (5.1) (4.1) ----- ------- ------- ------- ------- ------- Net loss................ (76.9) (121.9) (174.0) (133.7) (205.2) (174.1) ===== ======= ======= ======= ======= ======= </TABLE> Revenues were derived primarily from a limited number of content syndication relationships in 1998. The fixed nature of these agreements resulted in limited volatility in quarterly revenues during 1998. As our revenue mix shifts to a higher proportion of revenues being derived from advertising and electronic commerce, quarterly revenues may fluctuate more significantly than in prior quarters. Cost of revenues has increased each quarter due to higher editorial and content costs and third-party fees paid to athletes and content providers. Operating expenses exclusive of amortization 38

of deferred stock compensation and deferred incentives have increased each quarter on both an absolute and a percentage basis as we have significantly increased our headcount and built our infrastructure to support the growth of our business as well as increased spending on marketing, product development and professional fees. Liquidity and Capital Resources From inception through February 1998, we and the Predecessor Companies have funded our operations primarily through capital contributions and to a lesser extent, from the cash generated by operations. Since February 1998, we have funded our operations through a $4.5 million revolving loan that was established by our principal stockholder and have raised an aggregate of approximately $36.5 million, net of offering expenses, through the sale of our equity securities. Interest on outstanding debt accrues at an annual rate of prime plus 1% and the borrowings under the credit line are secured by our assets. All amounts borrowed under the credit line mature and become due upon the closing of this offering. At September 30, 1999, the outstanding balance on this credit line was approximately $4.5 million. We and the Predecessor Companies have entered into various licensing, royalty, distribution, and consulting agreements with various online sites, vendors and other non-employees. The remaining terms of these agreements provide for the payment of royalties, bounties, and certain guaranteed amounts on a per member and/or minimum dollar amount basis. Additionally, some agreements provide for a specified percentage of advertising and merchandising revenue to be paid to non-employees from whose online site the revenue is derived. There are minimum guaranteed payments required under such agreements at December 31, 1998 totalling $1.7 million. At September 30, 1999, we had approximately $9.3 million in cash and cash equivalents. Net cash used in operating activities was $729,000 and $7.7 million for the nine months ended September 30, 1998 and 1999, respectively. Net cash used in operating activities resulted primarily from our net operating losses, adjusted for certain non-cash items, including amortization of deferred stock compensation and deferred incentives. Non-cash charges related to the issuance of these options were $1.9 million, $2.6 million and $414,000 for the nine months ended September 30, 1999 and for the years ended December 31, 1998 and 1997, respectively. Non-cash charges relating to depreciation expenses for the nine months ended September 30, 1999 and, the years ended December 31, 1998 and 1997 were $268,000, and $47,000 and $15,000. Net cash used in investing activities was $2.4 million and $2.1 million for the nine months ended September 30, 1998 and 1999. Net cash used in investing activities was $39,000 and $2.4 million for 1997 and 1998. Net cash used in investing activities resulted primarily from capital expenditures related to purchases of computer software and equipment and acquisition of the predecessor companies and RotoNews during 1998 and 1999. Net cash provided by financing activities was $3.2 million and $19.0 million for the nine months ended September 30, 1998 and 1999. Net cash provided by financing activities was $243,000 and $4.1 million for the years ended December 31, 1997 and 1998. Net cash provided by financing activities for these periods includes capital contributions and borrowings from the revolving loan due to stockholder. The $19.0 million provided in the nine months ended September 30, 1999 includes $16.5 million of proceeds from the issuance of series B preferred stock and $2.5 million of proceeds from the revolving loan due to stockholder. In November 1999, we raised $17.8 million of proceeds from the issuance of common stock to our Chief Executive Officer and the issuance of series C preferred stock. 39

We have experienced a substantial increase in our capital expenditures since our inception, consistent with the growth in our operations and staffing, and we anticipate that this will continue for the foreseeable future. These expenditures are primarily for computer equipment, software, lease commitments, furniture and fixtures. We had no material commitments for capital expenditures at September 30, 1999, but we expect to incur capital expenditures and other lease expenses of approximately $4.0 million in 1999 and approximately $6.0 million in 2000. Additionally, we will continue to evaluate possible investments in businesses, products and technologies, and plan to expand our sales and marketing programs and conduct more significant brand promotions. In October 1999, we entered into an equipment lease agreement where we can finance up to a maximum amount of $2.8 million in capital expenditures. The agreement is for three years with an interest rate of 7.5%. This line will help us finance our capital investments. We believe that the net proceeds from this offering and net proceeds of $17.8 million from the series C preferred stock and the issuance of common stock in November 1999 combined with our current cash and cash equivalents, will be sufficient to fund our working capital and capital expenditure requirements for at least the next 12 months. However, we expect to continue to incur significant operating losses for the foreseeable future. To the extent we require additional funds to support our operations or the expansion of our business, we may sell additional equity, issue debt or convertible securities or obtain credit facilities through financial institutions. The sale of additional equity or convertible securities will result in additional dilution to our stockholders. We cannot assure you that additional financing, if required, will be available to us in amounts or on terms acceptable to us, if at all. If funding is insufficient at any time in the future, we may be limited in our ability to fund expansion, develop or enhance content or products, respond to competitive pressures or take advantage of business opportunities. Seasonality We expect that our revenues will be higher leading up to and during major U.S. sports seasons and sporting events and during the year-end holiday periods, and lower at other times of the year, particularly during the summer months. In addition, the effect of such seasonal fluctuations in revenues could be enhanced or offset by revenues associated with certain major sporting events, such as the Superbowl, or the effects of having our athletes participate in events that do not occur on an annual basis, such as the Olympics and the World Cup. Year 2000 Compliance Many existing computer programs use only two digits to identify a year. These programs were designed and developed without addressing the impact of the upcoming change in the century. If not corrected, many computer software applications could fail or create erroneous results by, at or beyond the year 2000. We use internally developed and third-party software, technology and other services that may fail due to the year 2000 phenomenon. For example, we are dependent on the financial institutions involved in processing our customers' credit card payments and a third party that hosts our servers. We are also dependent on telecommunications vendors to maintain our network and the United States Postal Service and other third-party carriers to deliver orders to customers. The year 2000 readiness of the general infrastructure necessary to support our operations is difficult to assess. For instance, we depend on the integrity and stability of the Internet to provide our services. We also depend on the year 2000 compliance of the computer systems and financial services used by consumers. Thus, the infrastructure necessary to support our operations consists of networks of computers and telecommunication systems located throughout the world and operated by numerous 40

unrelated entities and individuals, none of which has the ability to control or manage the potential year 2000 issues that may impact the entire infrastructure. Our ability to assess the reliability of this infrastructure is limited and relies solely on generally available news reports, surveys and comparable industry data. Based on these sources, we believe most entities and individuals that rely significantly on the Internet are carefully reviewing and attempting to remediate issues relating to the year 2000 compliance, but it is not possible to predict whether these efforts will be successful in reducing or eliminating the potential negative impact of year 2000 issues. A significant disruption in the ability of consumers to reliably access the Internet or portions of it or to use credit cards would have an adverse effect on demand for our services and would have a material adverse effect on us. Any failure of our material systems, our vendors' material systems or the Internet to be year 2000 compliant could also have material adverse consequences for us. Such consequences could include difficulties in operating our Web site effectively, taking product orders, making product deliveries or conducting other fundamental parts of our business. To minimize the effect of the year 2000 problem, we established a year 2000 compliance program that involves the identification, assessment and testing of the equipment and systems affected in the following manner: . the completion of an assessment of information technology (IT) equipment and systems, which includes web servers and web serving technology; . the completion of an assessment of non-information technology (non-IT) embedded systems such as building security, voice mail, fire prevention, climate control and other systems; and . an analysis of the readiness of significant third party vendors and suppliers of services. The program, which is expected to be completed by the middle of December 1999, covers the following phases: . development of an inventory of all IT equipment and systems and non-IT systems that are potentially affected; . determination of those systems that require repair or replacement; . repair or replacement of those systems; . testing of those repaired or replaced systems; and . creation of contingency plans in the event of Year 2000 failures. To date, less than 10% of assessed systems have required repair or replacement. Non-IT systems and internally developed programs have been reviewed, and are not considered to be date sensitive to the year 2000. Based on this evaluation, we do not believe that our systems and programs present year 2000 issues. However, if third party vendors and suppliers are not able to make all systems year 2000 compliant, our operations may be negatively affected. Because the majority of our infrastructure is new, costs attributable to this project to date have not been material. Based upon procedures performed to date, we further anticipate that future costs related to this project will also not be material; however, future costs are difficult to estimate and may differ materially from those currently projected. The anticipated costs associated with our year 2000 compliance program do not include time and costs that may be incurred as a result of any potential failure of third parties to become year 2000 compliant or costs to implement our future contingency plans. If systems important to our operations have not been made year 2000 compliant, or if third parties fail to make their systems year 2000 compliant in a timely manner, the year 2000 issue could negatively affect our business. 41

Qualitative and Quantitative Disclosures About Market Risk Our sales from inception to date have been made to U.S. customers and, as a result, we have not had any exposure to factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. However, in future periods, we expect to sell in foreign markets, including Europe and Asia. As our sales are made in U.S. dollars, a strengthening of the U.S. dollar could make our products less competitive in foreign markets. At September 30, 1999, we did not hold any significant short or long-term investments and, therefore, did not have any market risk exposure related to changes in interest rates related to such investments. As of September 30, 1999, we were exposed to interest rate risk on our outstanding revolving loan due to stockholder. The table below presents principal amounts by expected maturity date and the weighted average interest rates of debt obligations which are sensitive to changes in interest rates. <TABLE> <CAPTION> Expected Maturity Date ------------------------------------------------------ 1999 2000 2001 2002 2003 ---------- ---------- ---------- ---------- ---------- (in thousands) <S> <C> <C> <C> <C> <C> Revolving loan due to stockholder............ $ -- $ -- $ -- $ -- $4,468,085 Weighted average interest rate.......... -- -- -- -- 8.75% </TABLE> 42

INDUSTRY BACKGROUND The Sports Market Sports is one of the most popular forms of entertainment, generating intense interest and profound loyalty among sports fans worldwide. Approximately 87% of the U.S. population over the age of 11 consider themselves sports fans, according to the 1998 espn/chilton Sports Poll. The popularity of sports has produced one of the largest industries in the world, creating substantial business opportunities, such as providing sports-related entertainment, products and advertising. Over $130 billion of revenue was derived from spectator sports, sporting goods and sporting publications in the U.S. in 1995, according to a study from the Georgia Institute of Technology. More specifically, in 1998: . Retailers sold approximately $45.6 billion of official licensed sports merchandise and collectibles according to the Sporting Goods Manufacturer Association; . Sports-related television advertising was approximately $4.8 billion and is projected to increase to $6.6 billion in 2003, according to Paul Kagan Associates, Inc. In addition to on-air advertising, many corporations spend significant amounts of sponsorship dollars annually to associate their brands with individual athletes and sporting events. Although the sports market is large, it is also highly fragmented, comprising thousands of individual communities of sports fans who are devoted to their favorite leagues, teams and athletes and desire higher levels of interaction with the players they admire. Many of these individual communities are sizeable in their own right and often consist of geographically dispersed sports fans. Whether it be Dallas Cowboys fans or a fantasy baseball league, each distinct community includes numerous sports fans who desire timely, original and in-depth information and authentic merchandise and collectibles related to their favorite leagues, teams and athletes. The Dallas Cowboys, for example, generated over $50 million in home game receipts and suite revenues, and fans bought approximately $300 million of Dallas Cowboys merchandise in 1998 according to Forbes magazine. Emergence of the Internet The Internet has emerged as a mass medium for commerce and communication, enabling millions of people worldwide to be entertained, interact, distribute and collect information, create communities among individuals with similar interests and make purchases electronically. International Data Corporation projects that worldwide Internet use will grow from approximately 142 million users at the end of 1998 to 399 million users in 2002. As a platform for commerce, the Internet enables businesses to reach a worldwide audience, achieve greater economies of scale and operate with less physical infrastructure, while providing consumers with greater convenience and access to a broad selection of content and products. International Data Corporation projects that the value of goods and services purchased worldwide on the Internet will grow from approximately $50 billion in 1998 to $734 billion in 2002. As an advertising medium, the Internet provides numerous advantages over traditional media, including the ability to target specific demographic groups, measure the effectiveness of advertising campaigns and modify these campaigns in response to real-time feedback. Forrester Research projects that total annual spending on Internet advertising will reach $15 billion in 2003. 43

Traditional Sports Media and Commerce While traditional mass media, such as broadcast and cable television, radio, newspapers and magazines, are effective in providing sports programming and content to a broad audience, these media are limited in their ability to efficiently tailor their content to appeal to the specific interests of distinct sports communities. In addition, traditional media are constrained in their ability to enable sports fans to interact with each other and with their favorite athletes, writers and sports personalities. Similarly, we believe that traditional retail distribution channels face a number of challenges in providing a satisfying shopping experience for consumers of sports merchandise and collectibles within individual sports communities. Traditional retail distribution channels are generally limited in their ability to provide a broad selection of products related to teams and players outside of their local markets. They are also limited in their ability to quickly alter their inventory or presentation of sports offerings in response to specific sporting event outcomes and milestones. In addition, it is difficult to verify the authenticity of sports collectibles because the traditional retail distribution channels generally do not source these items directly from athletes. Existing Internet Sports Offerings In response to the limitations of traditional sports media and commerce, the Internet has emerged as an attractive and growing channel for the distribution of sports content and products. Approximately 36 million people in the United States accessed sports information on the Internet in 1998, 40% more than in 1997, as estimated by the espn/chilton Sports Poll. According to International Data Corporation, approximately 58% of Internet users are between the ages of 12 and 34. The Internet has become a medium of choice for individuals in this age group. We believe that sports has become a popular application over the Internet because, among other reasons, there is a significant overlap between the demographic of Internet users and sports fans. Although there are many Web sites that include sports information as part of their content offerings, these sites typically offer general information and do not provide content and commerce targeted at distinct communities of sports fans. Most sites do not create communities for fans to interact with one another and with athletes and other sports personalities or offer electronic commerce integrated into their sports content. Because their sports content is typically generic, these sites are required to incur significant marketing expenses to differentiate themselves from other sites with comparable information. Because of these limitations and the desire to attract users, Internet portals and other destination sites continue to seek ways to differentiate their sites by expanding and enriching their offerings with distinctive content, including sports content. This demand has created a significant market for syndicated content, including sports content, that is original, entertaining and informative. 44

BROADBAND SPORTS You should read the following summary together with the more detailed information regarding our company and the common stock being sold in this offering and our Consolidated and Combined Financial Statements and Notes to Consolidated and Combined Financial Statements appearing elsewhere in this prospectus. Broadband Sports is a leading Internet provider of original content and commerce for hundreds of individual sports communities. These geographically dispersed communities are composed of fans who follow individual sports, teams and athletes and are characterized by a passionate demand for content and commerce relating to their particular interests. In aggregate, these sports communities generated over $130 billion in revenue according to the most recently published study from the Georgia Institute of Technology. We believe that we are well positioned to target these communities through our development of distinct online media properties, each of which is built around a set of proprietary assets. By leveraging these proprietary assets, we have created a unique and compelling network of content, community and commerce offerings. Through our partnerships with AOL, eBay, Fox, uBid, and Yahoo!, we are able to efficiently reach these various communities with the type of content and commerce offerings they demand and derive revenue from multiple sources. During October 1999, we had over 35 million page impressions across our properties. To date, we have developed four online media properties: . Athlete Direct--Athlete Direct is a leading provider of athlete Web sites. We currently have contracts with more than 200 athletes that provide us with certain exclusive online rights, and we operate the official sites for athletes such as: <TABLE> <S> <C> <C> Troy Aikman Ken Griffey, Jr. Dennis Rodman Drew Bledsoe Tony Gwynn Keith Van Horn Barry Bonds Mia Hamm Michael Waltrip Kobe Bryant Anna Kournikova Bernie Williams Brett Favre Karl Malone Ricky Williams Sergei Fedorov Mike Piazza Steve Young </TABLE> We create Web sites offering unique content and contextually relevant commerce relating to each of our athletes. Our athletes provide interactive content and authentic e-commerce opportunities that are not readily available elsewhere. In addition, these characteristics enable Athlete Direct to create vibrant communities where fans can interact with each other. By aggregating numerous athlete sites under one network, Athlete Direct can consistently provide fans with new, original content and commerce. . Pro Sports Xchange and College Sports Xchange--PSX and its collegiate division, CSX, are leading sources of in-depth team and player information online. PSX covers all MLB, NFL, NBA and NHL sports teams and players and CSX covers every Division I college football and basketball team. Each of these communities is seeking the latest and best inside information, which is not readily available through other online or offline media outlets. PSX is able to provide up-to-date information through its network of over 270 local and regional sports writers, all of whom are under contract to provide us with exclusive online content. . RotoNews--RotoNews is a leading online fantasy sports site offering proprietary news, games and statistical and commissioner services. Because participants invest significant time learning 45

league rules, becoming familiar with the user interface and personalizing their site by entering specific league and player information, we believe that RotoNews creates significant user loyalty and generates frequent visits of extended duration. . SportsAuthentics.com--SportsAuthentics.com is an Internet retailer of sports collectibles and merchandise. We address the limitations of the current distribution channels by providing team and athlete products to fans outside of their local markets and authentic, player/team endorsed products. We are also able to offer unique products which are available exclusively through SportsAuthentics.com. We syndicate our distinctive sports content to various distribution partners, including AOL, eBay, Fox Sports, uBid, and Yahoo!. Together, the distribution of our content and products across multiple platforms enables us to effectively target numerous sports communities, increase brand awareness, promote our product offerings and generate revenues from multiples sources. Our properties enable us to derive revenue from multiple sources, including: . Content syndication. The majority of Internet companies pay significant fees to distribute their content and product offerings online. By contrast, the distinctiveness and in-depth analysis of our content has enabled us to receive significant syndication fees from our distribution partners, such as AOL, Fox Sports and Yahoo! . Advertising. We offer advertisers the opportunity to target the attractive demographics of sports enthusiasts and associate their brands with high-profile athletes and sports personalities. . Electronic Commerce. We offer sports fans an easy-to-use environment for purchasing authentic player and team related merchandise and collectibles. . Subscription. We offer subscriptions to premium content offerings such as My Baseball Daily, to provide in-depth, original information about teams and players that is generally not available through traditional media sources. In creating and delivering our original content and commerce to distinct sports communities, we obtain efficiencies across our various sports media properties through the common use of our proprietary assets, distribution and technology. We believe we can continue to leverage aspects of our existing assets, distribution and technology to assist in the development of new properties focused on different sports communities. Our Strategy Our objective is to be the leading online provider of proprietary sports content and products to a large number of sports communities worldwide. Key strategies to achieve our objective include: Continue to Acquire Proprietary Assets. Athletes, writers and sports personalities are fundamental to the growth and popularity of sports. We intend to both continue adding to our existing asset base of athletes, writers and sports personalities, and to develop and acquire new types of proprietary assets. During 1999, we have added more than 150 athletes, writers and sports personalities to our various properties. Continue to Develop Original Content, Programming and Related Product Offerings. Currently, we believe we are the leading provider of athlete- oriented content, in-depth player and team information, and fantasy news online. While some Internet businesses provide unique content and a 46

large number offer products, very few companies create their own proprietary content and sell the products that they develop. We intend to continue to leverage our proprietary assets to create and offer both original content and compelling products targeted at both the distinct sports communities we now serve as well as new sports communities we do not currently target. This will include an increase in the number of properties we develop, programs we produce and commerce products we create. Capitalize on Multiple Distribution Partners. We currently distribute our content and products through leading online sites such as AOL, eBay, Fox Sports, uBid and Yahoo!. The distinctiveness of our original content and products provides significant value to our distribution partners. We intend to continue to distribute our content and products across multiple platforms to effectively target distinct sports communities, increase brand awareness of our properties, promote our product offerings and generate revenues for us and our partners from multiple sources. To augment the distribution of our content and products, we intend to pursue additional distribution partners and to release a number of new web sites, including the public release of the www.athletedirect.com site. Increase Traffic and Build Awareness of Our Properties. To date, we have capitalized on the unique nature of our offerings and the efforts of our distribution partners to drive traffic and promote our properties. In addition to using our present distribution relationships to drive traffic and enhance awareness of our properties, we intend to market our brands and properties through both traditional media and online campaigns and to leverage the significant brand-name recognition of our high-profile athletes and sports personalities to effectively promote their sites. For instance, due to Mia Hamm's high profile during the 1999 Women's World Cup, she was able to generate over 600,000 page impressions over a period of only a few days. Capitalize on Evolving Broadband Opportunities. We believe that online sports-related content will become more compelling in a broadband environment. To address this opportunity, we intend to offer enriched broadband programming, such as the creation of a 24 hours a day, seven days a week broadband commerce environment featuring individual athlete hosts, the broadcast of event-related programming, and the development of real-time reports from our sports writers and personalities. We intend to develop these types of broadband programming to capitalize on the benefits of a number of emerging platforms and standards. Capitalize on Common Infrastructure. We are building a common technology backbone across all of our properties. We believe that this will enable us to achieve significant cost savings in technology development, bring new properties to market in an expeditious manner and capture the value in the relationship between our various properties and the communities they serve. For example, a Green Bay Packer fan reading a PSX editorial product about his team can be identified and offered a related product such as a Brett Favre signed football. 47

Our Properties To capitalize on the opportunities within the online sports marketplace, we develop branded properties that combine original content and compelling products. We offer our content and products through selected distribution partners to effectively reach sports fans within distinct sports communities. Currently, we own four online sports media properties: <TABLE> <CAPTION> Property Revenue Sources Primary Distribution Partners -------- -------------------- ----------------------------- <S> <C> <C> [Athlete Direct Logo] Official athlete sites, original athlete Content Syndication AOL programming, vibrant communities Advertising eBay and online stores Electronic Commerce Yahoo! [PSX Logo] In-depth professional and collegiate team Content Syndication AOL and player information from our network Subscription AOL.com of sports writers Advertising Fox Sports Yahoo! [RotoNews Logo] Comprehensive fantasy news, games and Advertising Cox Media (Fastball.com) statistical and commissioner services Subscription New York Post San Diego Tribune Sandbox.net Wall Street Sports [SportsAuthentics.com Logo] Sports related merchandise Electronic Commerce AOL and collectibles uBid </TABLE> Athlete Direct Commencing operations in 1996, Athlete Direct is a leading developer, publisher and aggregator of high-quality, official online sites for athletes, based on the number of athletes under contract. Athlete Direct's athlete partners include some of the world's most prominent athletes across 10 sports, including football, baseball, basketball, auto racing and tennis. Currently, Athlete Direct has contracts with over 200 athletes that provide Athlete Direct with certain exclusive online rights. 48

Athlete Direct is an online destination site for sports fans to obtain information about, interact with and purchase products relating to, their favorite athletes. Athlete Direct aggregates individual athlete sites within the Athlete Direct-branded network. The individual athlete sites within this network create a focal point for communities of sports fans to interact with their favorite athletes, access original athlete-oriented content, participate in community activities and purchase merchandise and collectibles in a contextually relevant environment. For example, just prior to Superbowl XXXII, Athlete Direct created an original multimedia feature in which Jamal Anderson, star running back of the Atlanta Falcons, explained to his fans how to perform the "Dirty Bird" dance. At the same time, Athlete Direct offered fans an opportunity to buy exclusive, limited "Dirty Bird" merchandise and related collectibles. Athlete Direct designs each athlete site to target a distinct sports community consisting of fans of the athlete and the athlete's team or sport. Athlete Direct and its athletes provide users with original content, including online programs, breaking news, interviews, journals, live online chats, email correspondence and online fan clubs. By aggregating numerous athlete sites from a variety of sports, Athlete Direct can consistently provide sports communities with fresh and original content and products throughout the year. By contrast, independently operated individual athlete sites are generally restricted to the content that can be provided by an individual athlete and limited by the duration of the athlete's season and the athlete's ability to participate on his or her site on a continual basis. Additionally, Athlete Direct enables fans to purchase merchandise and collectibles directly from the athletes' stores located within the athletes' sites. Athlete Direct offers its athletes a number of benefits, including a complete online solution in terms of design, publishing, marketing, promotion and day-to-day operation of their sites. Through Athlete Direct's online sites, athletes can interact with a larger number of fans more effectively than through traditional personal appearances such as card shows, radio and television interviews or mailings. Additionally, participation in their sites provides athletes with the opportunity to manage their public and media interactions more effectively, control distribution of selected products, create a platform to derive additional revenues from existing and new sponsors, and receive greater financial benefit from the sale of related merchandise and collectibles. As a member of the Athlete Direct network, each athlete benefits from the traffic generated directly by his or her site as well as from the traffic generated by the other athlete sites and the traffic generated by Athlete Direct's distribution partners. 49

Features of our Athlete Sites Below is an example of an individual athlete's official site along with a description of the exclusive features which are available within each such site on the Athlete Direct Network . [Screen shot of Athlete Direct home page for Ken Griffey Jr. marked by numbers corresponding to the features described above.] 1. Athlete Journal--Regular updates from the athlete offering fresh, entertaining perspectives on events related to the athlete's sport and other non-sports related activities. These journals often contain an athlete's thoughts on key games and events within the athlete's sport, and can be in both a text or multimedia format. 50

2. Athlete Store--Electronic storefront offering athlete-signed memorabilia, collectible items and other team-licensed merchandise. Some athletes' sites may provide a personal audio greeting from the athlete to his or her fans upon entering the store. 3. Athlete Community Area--Suite of interactive features, including regularly scheduled chats, bulletin boards for fan and athlete postings and other interactive activities. The site also includes the athlete's message board, which is an interactive bulletin board where fans can communicate with each other on a variety of topics. Additionally, an athlete can interact with his or her fans by posting responses to fan questions on the message board. 4. Fan Club--This area includes original athlete commentary, regular email bulletins of upcoming events, new product offerings in the athlete's store and other new information targeted at the athlete's community of fans. 5. Gameday--Current news about the athlete during his or her season, including original commentary, recent events, game statistics and other highlights. 6. Multimedia Gallery--Recent and archived photos of players and teams. This area also includes original multimedia programming created around the individual athlete. 7. Fun Zone--Regular contests in which community members participate, with chances to win a variety of athlete-related or sports-related prizes and products. 51

Distribution From inception through March 31, 1999, Athlete Direct distributed its content exclusively on AOL. Subsequently, Athlete Direct expanded its relationship with AOL on a non-exclusive basis. Under the agreement, AOL continues to provide Athlete Direct with its own separately branded area and with certain guaranteed promotion, including promotion of a separate Stars Area within the AOL Sports Channel and an anchor tenancy position within the AOL Kids Channel. Athlete Direct also has an agreement with Yahoo! under which it provides Yahoo! with certain exclusive athlete content for a select number of athletes, produces live athlete events, develops fan clubs for each of its athletes within the Yahoo! Clubs area and creates individual athlete stores that are integrated within the Yahoo! Stores area. As part of this agreement, Athlete Direct receives continuous placement on the front page of the Yahoo! Sports area and the front of Yahoo! Sports screens. In addition, Athlete Direct has a distribution agreement with eBay which allows continuous placement on the front of eBay's sports collectibles page with links to various pages featuring Athlete Direct's athletes. On each of these athlete pages, Athlete Direct offers collectibles in the eBay auction format, such as in the example below. [Two screen shots of the athlete page for Anna Kournikova on the eBay web site at www.eBay.com] The above distribution relationships complement the traffic generated by the individual athlete sites such as www.kournikova.com as well as the traffic generated within the Athlete Direct Network. Revenue Sources Syndication. The distinctiveness of our content and programming has generally enabled us to command licensing fees and receive valuable distribution. We currently receive syndication revenues from AOL and Yahoo!. To date, substantially all of Athlete Direct's syndication revenues have been derived from its relationship with AOL. Advertising. Athlete Direct offers advertisers the opportunity to benefit from the association of their products and brands with Athlete Direct athletes and to target an attractive demographic group. In addition, advertisers, including existing sponsors of our athletes, can sponsor the sites of athletes and other areas within Athlete Direct. In 1998, Athlete Direct sold advertising or sponsorships to 52

companies such as Coca-Cola, Converse, eBay, Electronic Arts, Fila, Fox Sports, HBO, PeopleSoft and Prime Sports. We believe that the public release of the www.athletedirect.com site will provide Athlete Direct with additional advertising and sponsorship opportunities. Electronic Commerce--Merchandise. Athlete Direct currently offers sports merchandise through each athlete's online store. This merchandise includes licensed team and player apparel and league, event and team merchandise and collectibles. By selling through individual athlete's stores, we believe that we offer fans a logical venue for purchasing player-related and team-related products in a contextually rich environment, 24 hours a day, seven days a week. Although Athlete Direct currently sources substantially all of its merchandise from third-party vendors, we anticipate that, in the future, we will create certain Athlete Direct-branded merchandise for individual athletes and events. Electronic Commerce--Collectibles. Athlete Direct offers its own branded products, typically consisting of autographed and game-worn and game-used items. Athlete Direct's products are sourced directly from its athletes and sold through the athletes' sites online and through Athlete Direct's distribution partners. We believe that this approach greatly reduces the likelihood of fraud, a common characteristic of the sports collectibles market. To date, Athlete Direct has sourced only a limited amount of collectibles from its athletes, and we cannot assure you that Athlete Direct will be able to procure collectibles on a timely basis in the future, if at all. See "Risk Factors--We may not be able to obtain sufficient supplies of merchandise or collectibles to meet customer demand or to manage inventory effectively." Pro Sports Xchange PSX is a leading online provider of in-depth team and player information, based on the number of teams and players that PSX covers on a regular basis. PSX is built around The Writer Network, which was formed in the early 1990s to enable local sports journalists to cover sports on a national basis by exchanging detailed information relating to the local teams and athletes they covered. Today, PSX has evolved into a network of over 270 local and regional sports writers, who are under contract with PSX and have granted PSX certain exclusive online rights. The PSX network of sports writers includes many of the top beat writers who write for major publications in their respective cities. Typically, writers cover the same team for an extended period of time and have privileged access to players, coaches and other team officials. As a result, these sports writers possess in-depth information about the teams and players they cover that is not generally published or distributed by traditional media. With the proliferation of multiple media channels, such as cable, satellite and the Internet, sports fans are able to easily access general information, such as scores, statistics and game summaries. However, space limitations resulting from the costs of production and distribution have limited traditional media's ability to provide in-depth, timely information on a broad scale. PSX addresses the demand of sports fans within various communities for more in- depth coverage of particular sports, teams or athletes. Because PSX generates original and detailed information and distributes this content online, PSX can cost-effectively deliver large volumes of in-depth information to geographically dispersed sports fans. PSX's vertical content offerings include original editorials, predictions, opinions, injury reports, roster moves, trades and other commentary on teams and players. PSX provides this vertical content to a large number of sports communities. PSX produces and distributes original content covering over 110 professional sports teams and, through College Sports Xchange, its college division, over 300 collegiate sports teams. The following table lists of the professional and collegiate teams covered by the PSX and CSX writer networks. 53

TEAMS COVERED BY THE PSX AND CSX WRITER NETWORKS Professional Teams <TABLE> <S> <C> <C> <C> <C> <C> Anaheim Angels Chicago Bulls Florida Marlins Minnesota Twins Philadelphia 76ers St. Louis Cardinals Anaheim Mighty Ducks Chicago Cubs Florida Panthers Minnesota Vikings Philadelphia Eagles St. Louis Rams Arizona Cardinals Chicago White Sox Golden State Warriors Montreal Canadiens Philadelphia Flyers Tampa Bay Bucaneers Arizona Diamondbacks Cincinnati Bengals Green Bay Packers Montreal Expos Philadelphia Phillies Tampa Bay Devil Rays Atlanta Braves Cincinnati Reds Houston Astros Nashville Predators Phoenix Coyotes Tampa Bay Lightning Atlanta Falcons Cleveland Browns Houston Rockets New England Patriots Phoenix Suns Tennessee Titans Atlanta Hawks Cleveland Cavaliers Indiana Pacers New Jersey Devils Pittsburgh Penguins Texas Rangers Baltimore Orioles Cleveland Indians Indianapolis Colts New Jersey Nets Pittsburgh Pirates Toronto Blue Jays Baltimore Ravens Colorado Avalanche Jacksonville Jaguars New Orleans Saints Pittsburgh Steelers Toronto Maple Leafs Boston Bruins Colorado Rockies Kansas City Chiefs New York Giants Portland Trailblazers Toronto Raptors Boston Celtics Dallas Cowboys Kansas City Royals New York Islanders Sacramento Kings Utah Jazz Boston Red Sox Dallas Mavericks Los Angeles Clippers New York Jets San Antonio Spurs Vancouver Canucks Buffalo Bills Dallas Stars Los Angeles Dodgers New York Knicks San Diego Chargers Vancouver Grizzlies Buffalo Sabres Denver Broncos Los Angeles Kings New York Mets San Diego Padres Washington Capitals Calgary Flames Denver Nuggets Los Angeles Lakers New York Rangers San Jose Sharks Washington Redskins Carolina Hurricanes Detroit Lions Miami Dolphins New York Yankees Seattle Mariners Washington Wizards Carolina Panthers Detroit Pistons Miami Heat Oakland Athletics Seattle Sonics Charlotte Hornets Detroit Red Wings Milwaukee Brewers Oakland Raiders San Francisco 49ers Chicago Bears Detroit Tigers Milwaukee Bucks Orlando Magic San Francisco Giants Chicago Blackhawks Edmonton Oilers Minnesota Timberwolves Ottawa Senators St. Louis Blues </TABLE> Colleges and Universities <TABLE> <S> <C> <C> <C> <C> *Air Force Colgate *Houston Miss. Valley St. Portland *Akron *Colorado Howard *Mississippi Portland State *Alabama *Colorado State High Point *Mississippi State Prairie View A&M Alabama A&M *Columbia *Idaho *Missouri *Princeton Alabama State Connecticut Idaho State Missouri-Kansas City Providence *Alabama-Birmingham Coppin State *Illinois Monmouth *Purdue Alcorn State *Cornell Illinois State Montana Quinnipiac American Creighton Illinois-Chicago Montana St. Radford Appalachian State *Dartmouth *Indiana Morehead State Rhode Island *Arizona Davidson Indiana State Morgan State *Rice *Arizona State Dayton Iona Mount St. Mary's Richmond Arkansas-- Delaware *Iowa Murray State Rider Pine Bluff Delaware State *Iowa State N. Car. A&T State Robert Morris *Arkansas DePaul IUPUI *Navy *Rutgers *Arkansas State Detroit Jackson State NC--Asheville Sacramento State Arkansas-Little Rock Denver Jacksonville NC--Greensboro S. Carolina State *Army Drake Jacksonville State *Nebraska Sam Houston State *Auburn Drexel James Madison *Nevada-Las Vegas Samford Austin Peay State *Duke *Kansas *Nevada-Reno San Diego *Ball State Duquesne *Kansas State New Hampshire *San Diego State *Baylor Elon *Kent *New Mexico San Francisco Belmont (Tn.) E. Tennessee State *Kentucky *New Mexico State *San Jose State Bethune-Cookman *East Carolina La Salle New Orleans Santa Clara *Boise State Eastern Illinois Lafayette Niagara SE Missouri State *Boston College Eastern Kentucky Lamar Nicholls State SE Louisiana Boston *Eastern Michigan Lehigh No. Carolina-Wilmington Seton Hall *Bowling Green Eastern Washington Liberty Norfolk State Siena Bradley Evansville Long Beach State *North Carolina *SMU *Brigham Young Fairfield Long Island University *North Carolina State South Alabama *Brown Fairleigh Dickinson *Louisiana State North Carolina-Charlotte *South Carolina Bucknell *Florida *Louisiana Tech *North Texas South Florida *Buffalo Florida A&M *Louisville *Northeast Louisiana Southern Butler Florida Atlantic Loyola Northeastern *Southern California Cal Poly-San Luis Obispo Florida International Loyola Marymount Northern Arizona Southern Illinois Cal State-Northridge *Florida State Maine *Northern Illinois *Southern Mississippi Cal State-Fullerton Fordham Manhattan Northern Iowa Southern Utah *California Berkeley *Fresno State Marist *Northwestern Southwest Missouri State California Irvine Furman Marquette Northwestern State *Southwestern La. California Santa Barbara George Mason *Marshall *Notre Dame St. Bonaventure Campbell George Washington *Maryland Oakland St. Francis (NY) Canisius Georgetown Maryland-Eastern Shore *Ohio St. Francis (PA) Centenary *Georgia Massachusetts *Ohio State St. John's Central Connecticut State Georgia Southern McNeese State *Oklahoma St. Joseph's *Central Florida Georgia State Md.-Baltimore County *Oklahoma State St. Louis *Central Michigan *Georgia Tech Md.-Eastern Shore Old Dominion St. Mary's Charleston Gonzaga *Memphis Oral Roberts St. Peter's Charleston Southern Grambling St. Mercer *Oregon *Stanford Chattanooga Hampton *Miami *Oregon State Stephen F. Austin Chicago State Hartford *Miami (Ohio) Pacific Stetson *Cincinnati *Harvard *Michigan *Penn State SW Texas State *Clemson *Hawaii *Michigan State *Pennsylvania *Syracuse Cleveland State Hofstra *Middle Tenn. State Pepperdine *Temple Coastal Carolina Holy Cross *Minnesota *Pittsburgh *Tennessee Col. of Charleston Tennessee State Tennessee Tech Tennessee-Martin *Texas *Texas A&M *Texas Christian *Texas Tech Texas-Arlington *Texas-El Paso Texas-Pan American Texas-San Antonio Texas Southern The Citadel *Toledo Towson Troy State *Tulane *Tulsa *UCLA *Utah *Utah State Valparaiso *Vanderbilt Vermont Villanova *Virginia Virginia Commonwealth *Virginia Tech VMI Wagner *Wake Forest *Washington *Washington State Weber State *West Virginia Western Carolina Western Illinois Western Kentucky *Western Michigan Wichita State William & Mary Winthrop *Wisconsin Wisconsin-Green Bay Wisconsin-Milwaukee Wofford Wright State *Wyoming Xavier *Yale Youngstown State </TABLE> ----------------- * Covers both Division I football and basketball. All other schools only offer Division I basketball programs. 54

PSX collects and stores the information it receives from its writer network through its proprietary database. This information is then packaged into two general types of content offerings: offerings that are syndicated to online sites and specialized content offerings that are sold on a subscription basis. Some of our current content offerings include: <TABLE> <S> <C> <C> Product Description Price ------- ----------- ----- PSX Insider Team Reports.... In-depth coverage of all Varying content syndication fee NFL, MLB, NBA and NHL teams and daily editorial features CSX Insider Team Reports.... In-depth coverage of all Varying content syndication fee Division I college football and basketball teams Player Notes................ Daily highlights of key Varying content syndication fee player news from MLB and the NFL My Baseball Daily........... Daily personalized updates $9.95 per season per subscription regarding players selected in subscribers' portfolios The Minor League Scout...... Daily information on minor $9.95 per season per subscription league baseball teams and players Fred Edelstein's NFL Football Insider........... Weekly NFL gossip $19.95 per year per subscription Fred Edelstein's NFL Draft Report..................... Annual insider view of the $9.95 per subscription NFL draft Wrestling Observer.......... In-depth coverage of $9.95 per month or $99.95 professional wrestling annually </TABLE> By working with PSX, sports writers are able to generate additional income and, in certain cases, further develop their individual brand names. Sports writers in the PSX network are paid a flat fee for syndicated content and can participate with PSX in revenues derived from the sale of subscription-based premium content offerings. Distribution and Revenue Sources PSX syndicates its content through AOL, Internet portals and other destination sites and sells its premium content offerings to users on a subscription basis. The PSX Insider Team Reports and CSX Insider Team Reports are currently provided for all teams to such portals as AOL, AOL.com and Fox Sports. In addition, PSX produces the Team Areas for all major professional and college teams within AOL Sports, providing team and player feeds and news updates, among other production responsibilities. PSX controls the majority of promotional links within the Team Areas, which it uses to cross-promote our other properties. Player Notes is syndicated to many online sites, including AOL, Fox Sports and Yahoo!. All of PSX's distribution partners are obligated to promote PSX's premium products as part of their license agreements. These premium products are also distributed through a number of online sites, including Allstar Stats, Prime Sports Interactive and Total Quality Stats. To date, PSX has derived substantially all of its revenues from the syndication of PSX Insider Team Reports and CSX Insider Team Reports. PSX also generates revenues from the sale of subscriptions to its premium content offerings. To date, these revenues have not been material. 55

RotoNews RotoNews was founded in 1997 and was acquired by us in February 1999. RotoNews is a leading online fantasy sports site, offering commissioner services, player news and statistical services. Unlike competing fantasy sites, RotoNews offers its full suite of fantasy news and services free to consumers. This strategy has helped RotoNews build a significant audience base. RotoNews currently operates commissioner services for over 48,000 active leagues representing over 200,000 fantasy players. RotoNews supplements its commissioner services with regular player updates, which are delivered both through the rotonews.com site and through free email subscriptions. RotoNews currently has over 296,000 registered users and sends out regular emails to over 55,000 email subscribers. To extend its brand and build its traffic, RotoNews provides player content and commissioner services to other sites, including online newspapers and other sports sites. 56

Fantasy sports have experienced significant growth in the United States over the past several years. Currently, millions of fantasy sports fans play their games, receive their statistics, or access information about their fantasy teams online. Leading sports sites that provide fantasy games have traditionally charged users fees to participate in their fantasy games or to utilize commissioner and statistical services. Because players invest significant time in entering specific league and player information, setting- up league rules, becoming familiar with the user interface and researching archived information, we believe that these services create significant user loyalty and generate frequent visits of extended duration. RotoNews Features Below is a copy of the RotoNews home Web page and an example commissioner page for an individual league, along with a description of selected features available on Rotonews.com. [Screen shot of RotoNews web site marked by numbers corresponding to the features described above.] 1. Commissioner Services--Offers fantasy sports participants commissioner services with daily statistics, updated standings, bulletin boards and other administrative services covering the NFL, NBA, MLB and NHL. 57

2. Player News--Up-to-date player information, news and statistics, as well as searchable athlete databases for various sports and leagues. -- Latest player information, statistical NFL, NBA, MLB, NHL projections and player rankings with a searchable database for every player. Additionally, offers feature stories, columns and team previews. Golf -- Latest player information with a searchable database for many professional golfers on the PGA tour and other worldwide tours. Auto Racing -- Latest driver information, with a searchable database for NASCAR, Formula One and other auto-racing series. Wrestling -- Latest news and information for many of the professional wrestlers within the WWF, WCW and ECW. College Football -- Latest news and information on individual college players within Division I NCAA football. 3. MyRotoNews--Provides users with a personalized Web page with news and statistics tailored to players chosen by the user. 4. Email Reports--Twice-weekly email newsletter providing up to date player news and information. 5. Office Pools--Online management tool for traditional office pools. Creates an easy-to-use graphical interface for participants to enter their picks online, see updated standings, access relevant team and player information and communicate with each other. 6. Fantasy Forum--Online community where users can share thoughts on fantasy sports topics, seek advice and information with other community members as well as seek participants for their online leagues. Distribution and Revenue Sources In addition to operating its Web site, rotonews.com, RotoNews has entered into distribution agreements with Fastball.com (owned by Cox Media), Sandbox.net, Wall Street Sports and the online versions of the New York Post and San Diego Union Tribune. Pursuant to these distribution agreements, RotoNews typically provides statistical services and/or fantasy games in a co- branded format. To date, RotoNews has derived substantially all of its revenues from the sale of advertising on its Web site. RotoNews also sells advertising placements within email newsletters it regularly sends to its customers. In addition, RotoNews receives a share of the advertising sold on the sites to which it provides commissioner services and/or player information. In March 1999, RotoNews began selling subscriptions to PSX's premium content offerings, such as My Baseball Daily. To date, RotoNews has not derived significant revenues from these premium content offerings. SportsAuthentics.com SportsAuthentics.com is an online retailer of sports-related merchandise and collectibles. Founded in the first quarter of 1999, SportsAuthentics.com aggregates products from a large number of providers, including Athlete Direct. SportsAuthentics.com offers a broad range of products across 58

major U.S. sports, including baseball, football, basketball, hockey, boxing and auto racing. Although SportsAuthentics.com does not source its products directly from athletes in the case of memorabilia, it works to carefully select reputable providers who represent that they produce such products directly from the source and provide legally binding certificates of authenticity. SportsAuthentics.com's objective is to become the premier provider of sports-related merchandise and collectibles. SportsAuthentics.com currently offers over 10,000 stock keeping units and believes it has become one of the largest sellers of collectibles online. We believe there is a significant opportunity to sell these types of products online because of the limitations inherent in traditional retail distribution. Because of the large number of teams and available products, traditional retailers cannot effectively inventory the large number of available products necessary to satisfy the demand of fans of different teams and athletes. Similarly, sports retailers have had a difficult time offering a wide range of collectibles and trading products, where the number of items is even larger. SportsAuthentics.com addresses some of the limitations of current distribution channels by: . providing access to products 24 hours, 7 days a week; . offering an extensive selection of products updated on a regular basis; . offering flexible pricing, including auction-based selling; and . targeting customers based on preference and buying patterns. 59

Distribution and Revenue Sources SportsAuthentics.com currently sells the majority of its products through an exclusive relationship with uBid, a leading online business-to-consumer auction site. As part of this relationship, SportsAuthentics.com provides sports memorabilia on the uBid.com site as illustrated below. [Screen shot of uBid web site at www.uBid.com displaying sports memorabilia offered by SportsAuthentics.com, and insert with close-up of memorabilia offered.] SportsAuthentics.com also operates individual team stores within the AOL Team Areas. SportsAuthentics.com is currently in the process of opening up additional online storefronts, though no assurances can be given when such stores will open. SportsAuthentics.com intends to launch a branded online retail presence in the first quarter of 2000. SportsAuthentics.com handles all order fulfillment and customer service associated with its sales. SportsAuthentics.com handles the majority of its order fulfillment through its own distribution center. 60

Strategic Relationships We have established a number of strategic relationships to obtain original sports content, provide broad distribution of our content and products and increase consumer awareness of our branded properties. These relationships include: Content and Product Partners Athletes Athlete Direct currently has agreements with over 200 athletes that have terms ranging from two to eight years, with longer terms for key athletes. These agreements generally provide Athlete Direct with exclusive rights to the athletes' online participation, as well as rights to use the athletes' names, likenesses and other attributes in connection with the online medium. The exclusivity provisions of these agreements permit the athletes to engage in limited online activities on behalf of their leagues, teams and sponsors. Under these agreements, athletes are required to participate in their online sites in specified manners and at specified times. This participation generally includes engaging in online chats, responding to fan emails, publishing online journals and providing audio content for online distribution. Each athlete shares in the gross profits generated from the athlete's site, including revenues derived from sales of merchandise, collectibles and advertisements. Pursuant to their agreements, some athletes are guaranteed minimum royalties. In addition, certain athletes are equity holders of our company. Sports Writers We have agreements with over 270 sports writers, which typically have a two- year term with a one-year extension at our option. These local and regional writers provide PSX with original sports-related content. The majority of these writers are beat writers who cover a particular team or conference for a traditional publication, such as a newspaper. The agreements require the writers to create original, in-depth content for PSX, provide PSX with exclusive rights to this content and restrict the writers from performing services for anyone, other than PSX, that provides online products or services. However, these agreements do permit the writers to provide similar information to, and to perform services for, daily newspapers, including newspapers that maintain online sites, that are the primary employers of the writers. We pay our writers a flat fee for content that we syndicate and, in some cases, a percentage of revenues derived from sales of subscriptions to selected premium content offerings. Distribution Partners AOL In January 1999, we entered into an interactive services agreement with AOL. Under this agreement, AOL is required to pay to us a license fee for programming and syndicated content. This programming and syndicated content includes both PSX team-by-team coverage of professional baseball, basketball, football and hockey and NCAA Division I college basketball and football, as well as a minimum number of athlete sites from Athlete Direct. In accordance with the agreement, Athlete Direct has created and operates a separately branded Athlete Direct area within both the AOL Sports Channel and the AOL Kids Channel. These sites are 61

promoted through the AOL Sports channel, including Sports Stars screens which Athlete Direct programs and through an anchor tenancy position within the AOL Kids Channel. AOL receives a percentage of revenues derived from placements and the sale of merchandise, collectibles and subscription-based premium content offerings through the Athlete Direct sites on AOL. PSX also syndicates selected Fantasy Sports content within the AOL Fantasy Center and, in exchange, receives guaranteed promotion for its subscription- based premium content offerings. The agreement expires June 30, 2001, unless earlier terminated. AOL has the option to extend the agreement for up to two additional one-year terms. During the first nine months of 1999, AOL accounted for approximately 50% of our revenues. Loss of this relationship, or a material adverse change in this relationship, would have a material adverse effect on our business. eBay In April 1999, Athlete Direct entered into a co-branding and advertising agreement with eBay, under which eBay acts as Athlete Direct's official online person-to-person auction venue for sports collectibles on behalf of its athletes. Pursuant to the agreement, Athlete Direct creates individual athlete sites within the eBay site. Athlete Direct updates content on these sites and provides signed collectibles for sale through eBay's auction environment. The various pages and auctions are promoted by eBay on certain selected pages, including at the top of eBay's primary collectibles channel. Unless earlier terminated, this agreement terminates in April 2001. Fox Sports In September 1998, PSX entered into a content license agreement with News America Digital Publishing, Inc. ("NADP"), an affiliate of Fox Entertainment Group, Inc. Under this agreement, PSX receives a syndication fee for providing Insider Team Reports and other content for distribution on foxsports.com. NADP is required to promote PSX's premium content offerings products. PSX pays NADP a royalty based on the net revenues of premium content products sold through Fox Sports Online. This agreement expires in December 2001. uBid In March 1999, SportsAuthentics.com entered into a two-year agreement with uBid. Under the uBid agreement, SportsAuthentics.com is the exclusive provider of sports collectibles on the www.uBid.com site. As part of this agreement, SportsAuthentics.com has agreed to offer a specified minimum dollar value worth of products on the www.uBid.com site each week. SportsAuthentics receives prominent branding within all areas of www.uBid.com where SportsAuthentics products are offered. uBid receives a percentage of gross revenues for sales made on its site. Yahoo! In May 1999, Athlete Direct and PSX entered into an agreement with Yahoo! to provide Athlete Direct content and PSX content to Yahoo! in exchange for a monthly license fee and promotion and placement within Yahoo! Sports and other Yahoo! properties. Athlete Direct produces athlete fan clubs and athlete stores for Yahoo! for a certain number of pre-determined athletes as well as a regular schedule of live events. Yahoo! receives a percentage of revenue derived from electronic commerce sold within the Yahoo! site. In addition, pursuant to this agreement, PSX licenses to Yahoo! player 62

content to be incorporated into Yahoo!'s Fantasy Area and its MyYahoo! service. PSX licenses and receives promotion and placement to promote its subscription products. This agreement expires in June 2000, and automatically renews for an additional year unless either party elects not to renew the agreement. Technology We use state-of-the-art technology to support our business. Our www.athletedirect.com site and all of our individual athlete sites include open application standard interfaces emphasizing a model that is highly scalable, flexible, modular and has a high degree of automation and redundancy in order to minimize single points of failure. The software platform and architecture for the www.athletedirect.com site and individual athlete sites is available through multiple Sun Microsystems servers, and integrated with an Oracle relational database, Netscape Enterprise server and Broadvision's One- to-One enterprise relationship management application environment. To publish content on the AOL platform, we employ AOL's proprietary "Rainman" mark-up language. Production involves creation and editing of text and graphics, which are uploaded from our offices to the AOL mainframe. For our AOL advertisements, Athlete Direct pages reference Web-based URLs to generate banner advertisements, which are controlled through AdForce's proprietary advertisement-reporting software. PSX and CSX utilize a number of Sun Microsystems servers integrated with an Oracle relational database, Netscape Enterprise server, Netscape PublishingXpert 2.2 for publishing, Broadvision's One-to-One enterprise relationship management application environment, and secure credit card capture and billing. In addition, PSX utilizes customized software for real- time update of content by sports writers and editors, and an extensive modem pool for dial-up remote access. The RotoNews platform utilizes a combination of Microsoft NT with SQL Server, IIS, Cold Fusion and ASP together with an Oracle relational database, and Broadvision's One-to-One enterprise relationship management application environment. We intend to consolidate the technologies used by all of our properties into a single, common infrastructure built around a Sun, Oracle and Broadvision infrastructure. This common platform will emphasize interoperability, scalability and stability. We cannot assure you that we will be able to publicly release the www.athletedirect.com site on a timely basis or effectively develop our common infrastructure. See "Risk Factors--We may experience difficulties and delays in the release and successful marketing of our www.athletedirect.com site," and "--We may not be able to respond to technological changes, and may not remain competitive with others that are better able to respond to these changes quickly." We maintain most of our computer systems with Exodus Communications in its El Segundo, California facility, which provides us with Internet connectivity via multiple DS-3 and OC-3 links. Exodus also provides human technical monitoring of all production services 24 hours a day, 7 days a week as well as protection against damage from fire, hurricanes, earthquakes, power loss, telecommunications failure and break-ins and full redundancy so that a failure in the network is automatically routed to a different provider. We also employ in-house monitoring systems, which include automated diagnostic software, that generate reports and pager calls in the event of system failures. Notwithstanding these precautions, any system failure that causes an interruption of service or a failure of our third-party providers to handle higher volumes of Internet traffic could have a material adverse effect on our business. 63

Sales and Marketing We have recently expanded our advertising and sales efforts, including the opening of a dedicated advertising sales office in New York. To date, we have sold sponsorships and advertising primarily through our distribution partners, such as AOL, and have worked with outside sales agencies in such efforts. As we continue to expand, we intend to create a larger internal sales force and open offices in additional cities. Similar to our sales efforts, in our marketing efforts, we work very closely with our distribution partners including AOL, Yahoo!, eBay and uBid. These partners provide us with placement within their services, driving traffic to our content and products. In addition, we have purchased selected promotion on various online sites like Pro Football Weekly and Sportsline.com for certain of our products. With the public release of our www.athletedirect.com site and other products, we anticipate spending a larger amount of marketing dollars, including expenditures for offline marketing. In so doing, we anticipate continuing to leverage our internal assets and focusing on selected communities on a region-by-region basis. Proprietary Rights Proprietary rights are important to our success and our competitive position. To protect our proprietary rights, we rely generally on copyright, trademark and trade secret laws, confidentiality agreements with third parties, and license agreements with consultants, vendors and customers. Despite such protection, a third party could, without authorization, copy or otherwise appropriate information from our database. Our agreements with employees, consultants and others who participate in development activities could be breached. We may not have adequate remedies for any breach, and our trade secrets may otherwise become known or independently developed by competitors. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States, and effective copyright, trademark and trade secret protection may not be available in those jurisdictions. We have applied for registration of several trademarks in the United States and will seek to register additional trademarks as appropriate. We cannot assure you that we will be successful in obtaining the trademarks for which we have applied. Even if these applications mature to registration, the trademarks may be successfully challenged by others or invalidated. If the applications do not register because third parties own the trademarks, or if our rights to use the trademarks are challenged by owners of similar rights, the use of the trademarks will be restricted unless we enter into arrangements with the third parties, which may be unavailable on commercially reasonable terms. We also use content from athletes, sports writers, sports personalities and other third parties and it is possible that we could become subject to infringement actions based upon this content. We generally obtain representations as to the origin and ownership of this content; however, this may not adequately protect us. Any of these claims, with or without merit, could subject us to costly litigation and the diversion of our technical and management personnel. There has been substantial litigation in the computer and online industries regarding intellectual property assets. Third parties may claim infringement by us with respect to current and future products, trademarks or other proprietary rights, or we may counterclaim against these parties. Any claims or counterclaims, with or without merit, could be time-consuming, result in costly litigation, divert management's attention, cause product release delays, require us to redesign our products or require us to enter into royalty or licensing agreements, any of which could harm our business. These royalty and licensing agreements, if required, may not be available on terms acceptable to us, if at all. 64

The operation of our business and our ability to expand into new areas may be restricted by rights of sports leagues and players' associations. Sports leagues, such as the National Football League, typically own league and team trademarks, and we may be required to obtain a license to any of those trademarks that we use. In addition, the leagues also own other rights, such as the rights to display highlights of games, that we may wish to use in our business in the future. License agreements with the leagues for trademarks or other rights, if required, may not be available on terms acceptable to us or at all, and failure to obtain these license agreements could adversely affect our business. Players' associations have certain exclusive rights to license athlete names, likenesses and other attributes for groups of athletes, referred to as group licensing rights. We may be required to obtain licenses from players' associations for these group licensing rights in order to conduct certain aspects of our business. If licenses were not available or were not provided on terms acceptable to us and we were required to modify our properties, our business would be adversely affected. We, and agents for some of the athletes with whom we have contracts, have received correspondence from the National Football League Players' Association telling us to cease creating, selling advertising and promoting Web sites for athletes represented by the players' association. Although we do not believe that there is a basis for the players' association position, if athletes and agents determine not to work with us because of the players' association claims or actions, our business would be adversely affected. Competition We compete for users, advertising, syndication, commerce and subscription revenues, as well as for athletes, sports writers, sports personalities and other content providers, with many other entities, such as: . entities that provide access to sports-related content and services (many of which have been established by traditional media companies through Web entities targeted to sports enthusiasts generally), Web search and retrieval services and other high-traffic Web entities; . sports agents, leagues and other third parties that have existing relationships with a number of athletes and sports personalities; . vendors of sports information, merchandise, products and services distributed through online sites and other means, including retail stores, mail, facsimile and private online bulletin board services; and . television, radio and other established media entities that broadcast sporting events. We have and might have in the future business relationships with some of our competitors, some of whom offer access to our services through their own Web sites, and some of our current partners may become competitors in the future. We anticipate that, as the Internet and other interactive distribution systems converge with traditional television broadcasting and cable, significant competition might come from the providers of broadband networks, including sports-oriented cable networks. Some of our existing competitors, as well as a number of potential new competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do, and may be better able to attract athletes, sports writers, sports personalities and other content providers, as well as distribution partners, agents, advertisers, viewers and consumers. These competitors may be able to respond more quickly than we can to new or emerging technologies and changes in online user preferences and to devote greater resources than we can to building our business. These competitors may develop content and product offerings comparable or superior to ours. 65

Barriers to entry are minimal, and current and potential competitors can launch new online sites at a relatively low cost. We expect that the number of our direct and indirect competitors will increase in the future and this might adversely affect our business, operating results and financial condition. Increased competition could result in lower revenues and loss of users, any of which could materially adversely affect our business, operating results and financial condition. Government Regulation We are subject to the same federal, state and local laws as other businesses on the Internet. There are currently relatively few laws directed specifically toward online media businesses. Due to the increasing popularity and use of the Internet and online businesses, however, it is possible that laws and regulations will be adopted with respect to the Internet and online businesses. Such laws could cover issues such as user privacy, pricing, fraud, content and quality of products and services, taxation, advertising, freedom of expression, intellectual property rights and information security. The laws governing online media remain largely unsettled even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy, fraud and libel apply to online media generally. Such legislation could hamper the growth in use of online media generally and decrease the acceptance of online media as a communications and commercial medium, which could have an adverse effect on our business. We generally do not collect sales or other taxes on goods sold on our online sites to users located outside of California. However, one or more states may seek to impose sales tax collection obligations on companies like ours that engage in or facilitate online commerce. A number of proposals have been made at the state and local level that would impose additional taxes on the sale of goods and services online. Such proposals, if adopted, could substantially impair the growth of electronic commerce and increase our costs and could adversely affect our opportunity to derive financial benefit from electronic commerce. If any state or foreign country were to successfully assert that we should collect sales or other taxes on the exchange of merchandise on our system, our business could be adversely affected. Recently, the Internet Tax Freedom Act was signed into law placing a three-year moratorium on new state and local taxes on Internet commerce. Existing state or local laws were excluded from the moratorium. Once this moratorium is lifted, new federal or state taxes may be imposed on Internet commerce. Future laws imposing taxes or other regulations on Internet commerce could adversely affect our business. We currently hold various Web addresses relating to our assets and brands, including broadbandsports.com, athletedirect.com, psx.com, rotonews.com and sportsauthentics.com. We may not be able to prevent third parties from acquiring Web addresses that are similar to our addresses, which could adversely affect our business. In addition, a number of third parties have registered as domain names the names of a number of Athlete Direct's athletes under contract. We may not be able to acquire these Web addresses in a cost- effective manner, or at all, which could adversely affect our business. The acquisition and maintenance of Web addresses generally is regulated by governmental agencies and their designees. The regulation of Web addresses in the United States and in foreign countries and the application of trademark laws to Web addresses is uncertain and subject to change. As a result, we may not be able to acquire or maintain relevant Web addresses in all countries in a cost-effective manner, or at all, where we may conduct business. 66

Employees As of November 15, 1999, we had 128 employees. Our ability to attract and retain highly qualified employees will be a principal determinant of our success. Competition for qualified personnel in the industry is high. We cannot assure you that our current and planned staffing will be adequate to support our future operations or that management will be able to hire, train, retain, motivate and manage the required personnel. None of our employees is represented by a labor union and we have not experienced any work stoppages. We consider our relations with our employees to be good. Facilities We are headquartered in Los Angeles, California, where we sublease 6,500 square feet located at 1640 S. Sepulveda Blvd., Los Angeles, California. The lease expires March 31, 2002. In July 1999, the Company entered into a new lease for 26,635 square feet. The Company anticipates moving into this new facility in January 2000. The lease expires October 31, 2006. At that time the current sub-lease will be terminated. In October of 1999, the Company entered into a lease for approximately 2,700 square feet located at 350 Fifth Avenue, New York, New York. The lease expires October 31, 2002. In addition, we sublease two offices and common areas at 820 Grant Avenue, Novato, California. The sublease for the two offices and common areas are on a month to month basis. We have an option to renew the sublease for an additional one-year period at the same monthly rental rates if the lessor exercises its option to renew for an additional year. We believe that our current facilities, including the new lease for 26,635 square feet, will be adequate to accommodate our needs for the foreseeable future. Legal Proceedings We are not currently subject to any material legal proceedings. We may from time to time become a party to various legal proceedings arising in the ordinary course of our business. Any such proceeding against us, even if not meritorious, could result in the expenditure of significant financial and managerial resources. 67

MANAGEMENT Executive Officers and Directors The following table sets forth the names, ages and positions of our executive officers and directors as of November 15, 1999: <TABLE> <CAPTION> Name Age Position ---- --- -------- <S> <C> <C> Richard D. Nanula....... 39 Chief Executive Officer and Chairman of the Board Tyler J. Goldman........ 33 President, Broadband Studios and Director Ross B. Schaufelberger.. 32 President, Athlete Direct and Vice President, Business Development Gregory S. Hebner....... 30 Chief Financial Officer Jose A. Royo............ 33 Chief Technology Officer John Collins............ 37 Vice President, New Media Programming Thomas F.X. Beusse...... 35 Vice President, Advertising Ahmed O. Alfi(2)........ 43 Director W. Allen Beasley........ 31 Director Frank J. Biondi, Jr..... 54 Director Stephen D. Greenberg(1)........... 51 Director Douglas Leone(2)........ 42 Director Geoffrey Y. Yang(1)..... 40 Director </TABLE> --------------------- (1) Member of the audit committee (2) Member of the compensation committee Richard D. Nanula has served as our Chief Executive Officer and one of our directors since November 1999. From August 1998 to May 1999, Mr. Nanula served as the President and Chief Operating Officer at Starwood Hotels & Resorts Worldwide, a Fortune 500 global hotel company. From February 1996 to March 1998 and August 1991 to November 1994, Mr. Nanula served as the Chief Financial Officer of The Walt Disney Company. From November 1994 to February 1996, Mr. Nanula was the President of the Disney Stores Worldwide. From December 1989 to August 1991, Mr. Nanula served as the Treasurer of The Walt Disney Company. Mr. Nanula received a B.A. degree from the University of California at Santa Barbara and an M.B.A. degree from Harvard University. Tyler J. Goldman is the founder of Broadband Sports and has served as President of Broadband Studios, the division of Broadband Sports focused on new properties, since November 1999. Mr. Goldman has served as a director of Broadband Sports since inception. From inception through October 1999, Mr. Goldman served as our Chief Executive Officer and President. From 1995 to 1997, Mr. Goldman served as an associate at the law offices of Steinberg & Moorad, an independent provider of athlete services. From 1992 to 1995, Mr. Goldman served as an associate at Wilson Sonsini Goodrich and Rosati, P.C., a law firm focused on technology companies. Mr. Goldman received an A.B. degree from Dartmouth College, and J.D. and Masters of Management degrees from Northwestern University. Ross B. Schaufelberger has served as our President, Athlete Direct and Vice President, Business Development since our inception. From July 1990 to February 1996, Mr. Schaufelberger served as Vice President of Marketing and Business Development at STATS, Inc., a provider of online sports statistical information. Mr. Schaufelberger received a B.A. degree from the University of Pennsylvania. Gregory S. Hebner has served as our Chief Financial Officer since May 1998. From August 1997 to May 1998, Mr. Hebner served as a senior analyst within the Technology and New Media Group of the Strategic Planning Department for The Walt Disney Company. From November 1993 to August 68

1995, Mr. Hebner worked as an operations manager for Premark International, a consumer goods company. From August 1991 to November 1993, Mr. Hebner served as an auditor for PricewaterhouseCoopers LLP, an independent accounting firm. Mr. Hebner received a B.S. degree in Accountancy from the University of Illinois, and M.B.A. degree from Harvard University. Mr. Hebner is a certified public accountant. Jose A. Royo has served as our Chief Technical Officer since December 1998. From August 1998 to December 1998, Mr. Royo served as a Program Manager for Trilogy Software, a provider of front-office software. From October 1997 to August 1998, Mr. Royo served as the Chief Information Officer for Crimson Solutions, a software company developing solutions for higher education. From September 1993 to August 1997, Mr. Royo served as Lead Software Engineer for Harvard University. From September 1990 to September 1997, Mr. Royo served as an instructor in the Department of East Asian Studies at Harvard University. Mr. Royo received a B.A. degree from Earlham College, and A.M., Ph.D. and M.B.A. degrees from Harvard University. John Collins has served as our Vice President, New Media Programming since November 1999. From April 1991 to November 1999, Mr. Collins served as a senior programming and sales executive for the National Football League. From April 1994 to November 1999, Mr. Collins served as the Senior Vice President of Programming and Sales and the Vice President of Programming and Sales at the National Football League. From April 1991 to April 1994, Mr. Collins served as Vice President Sales and Marketing for NFL Films. Mr. Collins received a B.S. degree from Long Island University. Thomas F.X. Beusse has served as our Vice President, Advertising Sales since August 1999. From November 1992 to July 1999 Mr. Beusse served as an advertising executive for Sports Illustrated, a division of Time-Warner. From August 1996 to July 1999, Mr. Beusse was the advertising director for Sports Illustrated's New York office. From August 1989 to November 1992, Mr. Beusse held various sales positions for Times Mirror Magazines and Hachette Publishing. Mr. Beusse received a B.A. degree from Ithaca College. Ahmed O. Alfi has served as a director of Broadband Sports since inception. Mr. Alfi is the President of Netcubator, the Managing Member of NMSS Partners LLC, an investment company. From January 1992 to present, Mr. Alfi has served as Chairman and Chief Executive Officer of Alfigen, a genetic diagnostic company. Mr. Alfi also serves as a director of Toytime.com, an online toy retailer and Insureon.com, an online business insurance exchange. Mr. Alfi received a B.S. degree from California State University, Northridge. W. Allen Beasley has served as a director of Broadband Sports since May 1999. Since September 1999, Mr. Beasley has been a principal of Redpoint Ventures, a venture capital firm. From June 1998 to September 1999, Mr. Beasley was an associate of Institutional Venture Partners, a venture capital firm. From August 1995 to December 1997, Mr. Beasley worked in various marketing positions for Ipsilon Networks, Inc. a provider of high-performance networking equipment. From June 1994 to August 1995, Mr. Beasley worked in business development for Synopsys, Inc. a provider of design automation software. Mr. Beasley received an A.B. degree in Economics and a M.B.A. degree from Stanford University. Frank J. Biondi, Jr. has served as a director of Broadband Sports since May 1999. Since February 1999, Mr. Biondi has served as Senior Managing Director of Waterview Advisors, LLC, an investment management firm that acts as the advisor to Waterview Partners, L.P. Mr. Biondi served as Chairman of the Board and Chief Executive Officer of Universal Studios, Inc., a media company, from April 1996 until November 1998. From July 1987 until January 1996, he was President, Chief Executive 69

Officer and a director of Viacom, Inc., a media company. Mr. Biondi has also served as a director of The Bank of New York, Vail Resorts, Inc., a resort operator, and About.com as well as several privately held companies. Mr. Biondi received an A.B. degree in psychology from Princeton University and a M.B.A. degree from Harvard University. Stephen D. Greenberg has served as a director of Broadband Sports since May 1999. Since April 1999, Mr. Greenberg has been a member of General Catalyst LLC, an investment company. Mr. Greenberg has also served as President of Classic Sports Network, Inc., a cable television programming service, from November 1993 through November 1998. From April 1993 to November 1993, Mr. Greenberg served as President of Stephen D. Greenberg, P.C., an independent business consulting firm. From January 1990 to April 1993, Mr. Greenberg served as Deputy Commissioner and Chief Operating Officer of Major League Baseball. Mr. Greenberg serves as a director on the board of directors of The Topps Company, a marketer of sports cards. Mr. Greenberg received a B.A. degree from Yale University, and a J.D. degree from the University of California at Los Angeles. Douglas Leone has served as a director of Broadband Sports since May 1999. Mr. Leone has been a partner of Sequoia Capital since July 1988. Mr. Leone served on the board of directors of International Network Services, an enterprise network service provider, from June 1993 to 1998 and Arbor Software, a software company, from June 1991 to 1997. Mr. Leone is currently on the board of directors of Scient Corporation as well as several privately held companies. Mr. Leone holds a B.S. degree in Mechanical Engineering from Cornell University, an M.S. degree in Industrial Engineering from Columbia University, and an M.S. degree in Management from the Massachusetts Institute of Technology. Geoffrey Y. Yang has served as a director of Broadband Sports since May 1999. Since June 1989, Mr. Yang has been a partner of Institutional Venture Partners (IVP), a venture capital firm. He is also a Managing Director of Redpoint Ventures, a venture capital firm. He is a director of Ask Jeeves, Inc., an online provider of natural-language question answering services, MMC Networks, Inc., a developer of network processors, TiVo, Inc., a provider of personal video recorders and personalized TV services, as well as several privately held companies. He has also been a director of Excite, Inc., an online portal company. Mr. Yang received a B.A. degree in Economics and a B.S.E. degree in Information Systems Engineering from Princeton University and a M.B.A. degree from Stanford University. Board Composition Our certificate of incorporation provides for a classified board of directors consisting of three classes of directors, each serving staggered three-year terms. As a result, a portion of our board of directors will be elected each year. To implement the classified structure, prior to the consummation of the offering, three of the nominees to the board will be elected to one-year terms, three will be elected to two-year terms and two will be elected to three-year terms. Thereafter, directors will be elected for three-year terms. Ahmed O. Alfi, W. Allen Beasley and Frank J. Biondi, Jr. have been designated Class I directors whose term expires at the 2001 annual meeting of stockholders. Tyler Goldman, Stephen D. Greenberg and Douglas Leone have been designated Class II directors whose term expires at the 2002 annual meeting of stockholders. Richard D. Nanula and Geoffrey Y. Yang have been designated Class III directors whose term expires at the 2003 annual meeting of stockholders. For more information on the classified board, see the section entitled "Description of Capital Stock -- Anti-takeover effects of provisions of our certificate and bylaws and Delaware law." 70

Executive officers are appointed by the board of directors on an annual basis and serve until their successors have been duly elected and qualified. There are no family relationships among any of our directors, officers or key employees. Board Committees In May 1999, the board established an audit committee and a compensation committee. The audit committee monitors the accounting practices and procedures and the scope of internal and external audits and will recommend the appointment of the independent auditors. The members of the audit committee are Stephen D. Greenberg and Geoffrey Y. Yang. The compensation committee evaluates and approves the compensation policies for the executive officers and administers our employee benefit plans. The members of the compensation committee are Ahmed O. Alfi and Douglas Leone. Director Compensation We reimburse members of our board of directors for out-of-pocket expenses incurred in the performance of their duties as directors. No member of our board of directors currently receives any additional cash compensation for his services as a director. Compensation Committee Interlocks and Insider Participation Prior to this offering, we did not have a compensation committee, and compensation decisions were made by the full board. Upon completion of this offering, the compensation committee will make compensation recommendations to the board. No interlocking relationship exists between the board or compensation committee and the board or compensation committee of any other company, nor has any interlocking relationship existed in the past. Executive Compensation The following table sets forth information concerning the compensation paid by us to our chief executive officer and our three other most highly compensated executive officers who served as executive officers during fiscal 1998 and whose total compensation for fiscal 1998 exceeded $100,000 (the "named executive officers"). SUMMARY COMPENSATION TABLE <TABLE> <CAPTION> Long-Term Compensation Annual Compensation ------------------ All Other Name and Principal --------------------- Awards Underlying Compensation Position Salary($) Bonus($) Options/SARS(#)(1) ($) ------------------ ---------- --------- ------------------ ------------ <S> <C> <C> <C> <C> Richard D. Nanula(2)...... $ -- $ -- -- $ -- Chief Executive Officer and Chairman Tyler J. Goldman.......... 150,000 -- -- -- President, Broadband Studios Ross B. Schaufelberger.... 125,000 26,850 -- -- President of Athlete Direct and Vice President, Business Development Gregory S. Hebner......... 95,000 17,500 2,352,941 -- Chief Financial Officer </TABLE> --------------------- (1) Consists of shares issuable pursuant to options granted under the 1998 Equity Incentive Plan. (2) Mr. Nanula became our Chief Executive Officer in November 1999. His expected annual salary for the year 2000 is $180,000. 71

Option Grants In Fiscal 1998 The following table sets forth certain information regarding stock options granted during 1998 to the named executive officers, including the potential realizable value over the 10-year term of the options based on annual rates of stock appreciation of 5% and 10%, compounded annually. These assumed rates of appreciation comply with the rules of the SEC and do not represent our estimate of future stock prices. Actual gains, if any, on stock option exercises will depend on the future performance of our common stock. In 1998, we granted options to acquire up to 12,174,853 shares to employees, consultants, directors and service providers, all under the 1998 Equity Incentive Plan and all at an exercise price equal to not less than the fair market value of our common stock on the date of grant as determined in good faith by the board. Optionees may pay the exercise price by check, note, delivery of already-owned shares of our common stock or any other instrument the board will accept. <TABLE> <CAPTION> Potential Realizable Value at Assumed Annual Rates of Number of Percent of Stock Price Securities Total Options Appreciation for Underlying Granted to Option Term(2) Options Employees in Exercise Price Expiration --------------------- Name Granted(1)(#) Fiscal Year(%) Per Share Date 5% 10% ---- ------------- -------------- -------------- ---------- ---------- ---------- <S> <C> <C> <C> <C> <C> <C> Richard D. Nanula(3).... -- -- -- -- -- -- Tyler J. Goldman........ -- -- -- -- -- -- Ross B. Schaufelberger.. -- -- -- -- -- -- Gregory S. Hebner....... 2,352,941 29.9% $0.015 12/04/08 $ 22,196 $ 56,250 </TABLE> --------------------- (1) All options granted to the named executive officers during 1998 were granted under the 1998 equity incentive plan. Mr. Hebner's options vest quarterly and become exercisable as to 294,118 shares each quarter commencing upon employment. See "Stock Plans." (2) Potential realizable values are net of exercise price but before taxes associated with exercise. (3) Mr. Nanula became our Chief Executive Officer in November 1999. Aggregated Option Exercises During Fiscal 1998 and Fiscal Year-End Option Values No options were exercised during 1998 by our chief executive officer or any of the other named executive officers. The following table sets forth information about the number and year-end value of exercisable and unexercisable options held by the named executive officers in the table below as of December 31, 1998. The "Value of Unexercised In-the-Money Options at December 31, 1998" is based on an assumed initial public offering price of $ per share, minus the exercise price, multiplied by the number of shares underlying the option. <TABLE> <CAPTION> Number of Securities Underlying Value of Unexercised Unexercised Options at In-The-Money Options at December 31, 1998(1) December 31, 1998 ------------------------- ------------------------- Name Exercisable Unexercisable Exercisable Unexercisable ---- ----------- ------------- ----------- ------------- <S> <C> <C> <C> <C> Richard D. Nanula(2)....... -- -- -- -- Tyler J. Goldman........... -- -- -- -- Ross B. Schaufelberger..... -- -- -- -- Gregory S. Hebner.......... 882,351 1,470,590 </TABLE> --------------------- (1) All options were granted under our 1998 equity incentive plan. Mr. Hebner's options vest quarterly and become exercisable as to 294,118 shares each quarter commencing upon employment. (2) Mr. Nanula became our Chief Executive Officer in November 1999. 72

Stock Plans 1998 Equity Incentive Plan. Our 1998 Equity Incentive Plan was approved by the board of directors and stockholders in December 1998. The 1998 equity incentive plan provides for the grant of options intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended, nonqualified stock options, the sale of restricted stock and the grant of other securities or benefits with a value derived from the value of common stock. The 1998 equity incentive plan also provides for the transfer or sale of common stock to selected individuals in connection with the performance of services for us. Initially, 35,294,117 shares of common stock were reserved for issuance under the 1998 equity incentive plan. We do not intend to grant further awards under the 1998 equity incentive plan after the completion of this offering. As of November 15, 1999, options to purchase 30,592,656 shares had been granted under the 1998 equity incentive plan. The board of directors or a committee designated by the board is authorized to administer the 1998 equity incentive plan, including the selection of individuals to whom grants of options are made, issuances of common stock, the terms of such grants or issuances, possible amendments to the terms of such grants or issuances and the interpretation of the terms of, and adoption of rules for, the 1998 equity incentive plan. The maximum term of any stock option granted under the 1998 equity incentive plan is ten years, except that with respect to incentive stock options granted to a person possessing more than 10% of our combined voting power, the term of these stock options may not exceed five years. The exercise price of incentive stock options granted under the 1998 equity incentive plan must be at least 100% of the fair market value of the common stock on the grant date except that the exercise price of incentive stock options granted to a 10% stockholder must be at least 110% of the fair market value on the grant date. The aggregate fair market value on the date of grant of the common stock for which incentive stock options are exercisable for the first time by an employee during any calendar year may not exceed $100,000. The purchase price of shares of common stock granted under the 1998 equity incentive plan must be at least 85% of the fair market value of the common stock on the grant date except that the purchase price of shares of common stock granted to a 10% stockholder must be at least 110% of the fair market value on the grant date. The individual agreements under the 1998 equity incentive plan may provide us with repurchase rights under the terms and conditions set forth in the equity incentive plan. Options generally become exercisable at the rate of 20% per year over four years. Incentive stock options cannot be transferred and other options can be transferred only in the discretion of the administrator of the plan, but cease to vest if they are transferred. The 1998 equity incentive plan will terminate in 2008, unless earlier terminated by the board. The 1998 equity incentive plan provides that we can cancel any unexpired, unpaid or deferred award (whether or not vested) at any time if the recipient of the award violates certain agreements with us or competes with our business within one year after termination of employment or engagement with us or renders services for a competitor during this time. In addition, if the recipient has violated any of these agreements within 180 days of exercise of an award, the recipient is obligated to pay us the amount of any gain realized or payment received as a result of the rescinded exercise. This payment must be made by returning to us all shares of capital stock that the recipient received in connection with the rescinded exercise, or if the shares have been transferred by the recipient, by paying in cash to us the fair market value of the shares transferred at the time of transfer of the shares. Except as otherwise provided in an individual award agreement, in the event of a merger in which we are not the surviving entity, the sale of all or substantially all of our assets or a reverse merger resulting in a change of control, each grant which is at the time outstanding under the equity incentive plan shall, unless the plan administrator in its discretion decides differently, will terminate immediately 73

prior to the consummation of such proposed transaction, unless the grant is assumed or an equivalent grant is substituted by the successor corporation. During the ten months ended December 31, 1998, we granted options to acquire up to 12,174,853 shares of common stock ranging from an exercise price of $0.015 per share to the per share price of the common stock in this offering. 1999 Stock Incentive Plan. Our 1999 Stock Incentive Plan was approved by the board of directors and stockholders in 1999. The 1999 stock incentive plan provides for the grant of options intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended, nonqualified stock options and stock appreciation rights. The 1999 stock incentive plan also provides for the transfer or sale of common stock to selected individuals in connection with the performance of services for us. Initially, up to 12% of the then-outstanding number of shares of common stock were reserved for issuance under the 1999 stock incentive plan which will be increased annually by a number equal to one percent of the number of shares of common stock outstanding as of December 31 of the immediately preceding calendar year. The board of directors or a committee designated by the board is authorized to administer the 1999 stock incentive plan, including the selection of individuals to whom grants of options are made, issuances of common stock, the terms of these grants or issuances, possible amendments to the terms of these grants or issuances and the interpretation of the terms of, and adoption of rules for, the 1999 stock incentive plan. The maximum term of any stock option granted under the stock incentive plan is ten years, except that with respect to incentive stock options granted to a person possessing more than 10% of our combined voting power, the term of these stock options may not exceed five years. The exercise price of incentive stock options granted under the 1999 stock incentive plan must be at least 100% of the fair market value of the common stock on the grant date except that the exercise price of incentive stock options granted to a 10% stockholder must be at least 110% of the fair market value on the grant date. The aggregate fair market value on the date of grant of the common stock for which incentive stock options are exercisable for the first time by an employee during any calendar year may not exceed $100,000. The purchase price of shares of common stock granted under the stock incentive plan must be at least 85% of the fair market value of the common stock on the grant date except that the purchase price of shares of common stock granted to a 10% stockholder must be at least 100% of the fair market value on the grant date. The individual agreements under the 1999 stock incentive plan may provide us with repurchase rights under the terms and conditions set forth in the stock incentive plan. Options generally become exercisable at the rate of 25% per year over four years. Incentive stock options are not transferable. The 1999 stock incentive plan will terminate in 2009, unless earlier terminated by the board. The 1999 stock incentive plan provides for automatic grants to non-employee directors. Each non-employee director, upon initial election or appointment to our board of directors, is entitled to receive options to purchase shares of common stock and follow-on grants in the amount of shares at the conclusion of each annual meeting of stockholders. The initial grants and follow-on grants become exercisable over four years with 25% of the shares vesting one year from the grant date and the remaining shares vesting in equal monthly installments thereafter. In the event of a merger in which we are not the surviving entity, the sale of all or substantially all of our assets or a reverse merger resulting in a change of control, each grant which is at the time 74

outstanding under the 1999 stock incentive plan shall, unless the plan administrator in its discretion decides differently, immediately prior to the specified effective date of such transaction, automatically . To the extent it has not been previously exercised, the grant will terminate immediately prior to the consummation of such proposed transaction, unless the grant is assumed or an equivalent grant is substituted by the successor corporation. 401(k) Plan We have a 401(k) plan pursuant to which eligible employees may elect to reduce their current salary by up to the statutorily prescribed annual limit and have the amount of the reduction contributed to the 401(k) plan. Contributions to the 401(k) plan by us are discretionary and, to date, we have not made any contribution to the 401(k) plan. The 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code so that contributions by participants to the 401(k) plan, and income earned on plan contributions, are not taxed to participants until withdrawn from the 401(k) plan. Employment Agreements Under an employment agreement dated November 1999, we will pay Richard D. Nanula a base salary of $180,000 per year plus performance bonuses at the discretion of the compensation committee of the board of directors. Other than as provided in his restricted stock purchase agreement, neither we nor Mr. Nanula shall have any further obligation to each other by way of compensation or otherwise if terminated. Under an employment agreement dated February 1998, we pay Tyler J. Goldman a base salary of $150,000 per year plus performance bonuses at the discretion of the compensation committee of the board of directors. After completion of this offering, Mr. Goldman's base salary will be increased to an amount to be determined by the compensation committee. The employment agreement has a term of three years; however, if Mr. Goldman is terminated for any reason other than for cause, he is entitled to a severance payment equal to six months of his then-current base salary at the time of termination. 75

CERTAIN TRANSACTIONS In connection with our formation, NMSS Partners, LLC ("NMSS") purchased all of our 2,000,000 shares of outstanding mandatory redeemable series A preferred stock for $1.00 per share and extended to us a $4.5 million revolving credit facility. In connection with the closing of this offering, all of the series A preferred stock will be redeemed for approximately $2.3 million and the $4.5 million credit facility will be repaid. NMSS owns more than 5% of our company, and two of its members, Ahmed O. Alfi and Amre Youness, were directors of our company at the time of these transactions. Mr. Alfi continues to serve as a director on our board of directors and is also the sole shareholder of the managing member of NMSS. In May 1999, we sold 29,166,663 shares of our series B preferred stock at a $0.60 per share. Each share of series B preferred stock will be converted to shares of common stock upon the closing of this offering for an aggregate of shares of common stock. In connection with this financing, we entered into an agreement that provides for certain rights relating to the registration of our common stock under the Securities Act of 1933, as amended. BRCM LLC and General Catalyst LLC each purchased 3,333,333 shares of series B preferred stock. In addition to BRCM LLC and General Catalyst LLC, Tyler Goldman, our President, Broadband Studios, Ross Schaufelberger, our President, Athlete Direct and Vice President, Business Development, NMSS, and funds affiliated with Institutional Venture Partners and Sequoia Capital entered into the agreement regarding registration rights. Frank J. Biondi, Jr. is a member of our board of directors and is affiliated with BRCM LLC, Stephen D. Greenberg is a member of our board of directors and is affiliated with General Catalyst LLC, W. Allen Beasley and Geoffrey Y. Yang are members of our board of directors and are affiliated with Institutional Venture Partners, and Doug Leone is a member of our board of directors and is affiliated with Sequoia Capital. In addition, funds affiliated with Institutional Venture Partners and Sequoia Capital each own, in the aggregate, more than 5% of our company. In November 1999, we sold 18,500,000 shares of our series C preferred stock at $0.80 per share. Each share of Series C preferred stock will convert to shares of common stock upon the closing of this offering for an aggregate of shares of common stock. Pursuant to a restricted stock purchase agreement, we sold an aggregate of 30,389,809 shares of common stock to Richard D. Nanula for approximately $18,233,885. In connection with the restricted stock purchase agreement, Mr. Nanula entered into a note with us, which had a principal amount of approximately $15,200,906. The note bears interest at the rate of approximately 6% per annum. A number of our officers have entered into employment agreements with us. See "Management--Executive Compensation" and "--Employment Agreements." Prior to the offering, we intend enter into indemnification agreements with each of our executive officers and directors. These agreements may require us, among other things, to indemnify them (other than for liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceedings against them as to which they could be indemnified. See "Description of Capital Stock--Limitation of Liability and Indemnification Matters." 76

PRINCIPAL STOCKHOLDERS The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of November 15, 1999, and as adjusted to reflect our sale of shares for: . each person (or group of affiliated persons) who we know to own beneficially more than 5% of our common stock; . each of our named executive officers and directors; and . all of our executive officers and directors as a group. Unless otherwise indicated, the address for each of the listed individuals is c/o Broadband Sports, Inc., 1640 South Sepulveda Boulevard, Suite 500, Los Angeles, California 90025. Except as otherwise indicated, and subject to applicable community property laws, the listed persons have sole voting and investment power with respect to all shares of common stock held by them. The numbers of shares in the table assumes no exercise of the underwriters' over- allotment option. Applicable percentage ownership in the table is based on 295,093,972 shares of common stock outstanding as of November 15, 1999, and shares outstanding immediately following the completion of this offering. Beneficial ownership is determined in accordance with the rules of the SEC. Shares of common stock subject to options that are presently exercisable or exercisable within 60 days of November 15, 1999 are deemed outstanding for the purpose of computing the percentage ownership of the person or entity holding those options, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity. To the extent that any shares are issued upon exercise of options or other rights to acquire our capital stock that are presently outstanding or granted in the future or reserved for issuance under our stock plans, there will be further dilution to new investors. <TABLE> <CAPTION> Percentage of Shares Beneficially Owned Shares ----------------- Beneficially Prior to After Name and Address of Beneficial Owner Owned Offering Offering ------------------------------------ ------------ -------- -------- <S> <C> <C> <C> NMSS Partners LLC (1).......................... 78,859,755 26.7% % 301 North Lake Avenue Suite 910 Pasadena, CA 91101 Ahmed O. Alfi (1).............................. 78,859,755 26.7 Tyler J. Goldman............................... 37,916,660 12.8 Entities affiliated with Institutional Venture Partners (2).................................. 32,250,000 10.9 Institutional Venture Partners 3000 Sand Hill Road Suite 290 Menlo Park, CA 94025 Geoffrey Y. Yang (2)........................... 32,250,000 10.9 Entities affiliated with Sequoia Capital (3)... 32,250,000 10.9 Sequoia Capital 3000 Sand Hill Road Building 4, Suite 280 Menlo Park, CA 94025 </TABLE> 77

<TABLE> <CAPTION> Percentage of Shares Beneficially Owned Shares ----------------- Beneficially Prior to After Owned Offering Offering ------------ -------- -------- <S> <C> <C> <C> Douglas Leone (3).............................. 32,250,000 10.9 Richard D. Nanula.............................. 30,389,809 10.3 Ross B. Schaufelberger......................... 9,787,500 3.3 Frank J. Biondi, Jr. (4)....................... 3,520,833 1.2 Stephen D. Greenberg (5)....................... 3,708,333 1.3 W. Allen Beasley............................... -- * Gregory S. Hebner (6).......................... 1,789,706 * All executive officers and directors as a group (13 persons).................................. 230,447,596 77.5% </TABLE> --------------------- * Less Than 1% (1) Represents 78,859,755 shares held by NMSS Partners, LLC. Mr. Alfi, one of our directors, is a director and member of NMSS. (2) Represents 981,436 shares held by IVP Broadband Fund, L.P., 30,690,096 shares held by Institutional Venture Partners VIII, L.P. and 578,468 shares held by IVM Investment Fund VIII, LLC. Mr. Yang, one of our directors, is a partner of Institutional Venture Partners. (3) Represents 19,350,000 shares held by Sequoia Capital Franchise Fund, 11,691,270 shares held by Sequoia Capital VIII, 148,350 shares held by Sequoia International Technology Partners VIII, 774,000 shares held by Sequoia International Technology Partners VIII (Q), 258,000 shares held by CMS Partners LLC and 28,380 shares held by Sequoia 1997. Mr. Leone, one of our directors, is a partner of Sequoia Capital. (4) Represents 3,520,833 held by Waterview Partners, L.P. Mr. Biondi, one of our directors, is a director and is affiliated with BRCM LLC. Mr. Biondi disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. (5) Represents 3,708,333 shares held by General Catalyst LLC. Mr. Greenberg, one of our directors, is a director and a member of General Catalyst LLC. Mr. Greenberg disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. (6) Represents 1,764,706 shares subject to options issued under the 1998 equity incentive plan, all of which are exercisable within 60 days of September 30, 1999. 78

DESCRIPTION OF CAPITAL STOCK The following description of our capital stock and certain provisions of our charter and bylaws are only summaries and are qualified by reference to our charter and bylaws filed as exhibits to the registration statement of which this prospectus is a part. At the closing of the offering our authorized capital stock will consist of shares of common stock, $0.001 par value per share, and shares of preferred stock, $0.001 par value per share. As of November 15, 1999, there were 2,000,000 shares of mandatorily redeemable series A preferred stock outstanding, 29,166,663 shares of series B preferred stock outstanding and 18,500,000 shares of series C preferred stock outstanding. The shares of mandatorily redeemable series A preferred stock outstanding prior to this offering will be redeemed upon the closing of this offering, the shares of series B preferred stock outstanding prior to this offering will be converted into 29,166,663 shares of common stock upon the closing of this offering and the shares of series C preferred stock outstanding prior to this offering will be converted into 18,500,000, shares of common stock upon the closing of this offering. Common Stock Holders of the common stock are entitled to receive, when and if declared by the board, dividends and other distributions in cash, stock or property from our assets or funds legally available for those purposes, subject to any dividend preferences that may be attributable to preferred stock. Holders of common stock are entitled to one vote for each share held of record on all matters on which stockholders may vote. Holders of common stock are not entitled to cumulative voting for the election of directors. There are no preemptive, conversion, redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are fully paid and non-assessable. In the event of our liquidation, dissolution or winding up, subject to any liquidation preferences that may be attributed to preferred stock, holders of common stock are entitled to share ratably in the assets available for distribution. After this offering there will be shares of common stock outstanding, including 247,427,309 shares of common stock currently outstanding, 29,166,663 shares to be issued upon conversion of the series B preferred stock, 18,500,000 shares to be issued upon conversion of the series C preferred stock, and shares to be issued in this offering. Preferred Stock Upon the closing of this offering, 5,000,000 shares of preferred stock will be authorized and no shares will be issued or outstanding. The board has the authority, without further action by the stockholders, to issue the shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking and purchase fund provisions, and the number of shares constituting any series and the designation of such series. The issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. The issuance of preferred stock could also have the effect of delaying, deferring or preventing a change in control. We have no present plan to issue any additional shares of preferred stock. 79

Warrants As of November 15, 1999, warrants to purchase up to 282,916 and 221,666 shares of common stock were outstanding at a purchase price of $0.60 and $0.80 per share, respectively. The warrants contain provisions for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the warrant in the event of stock dividends, stock splits, reorganizations and reclassifications and consolidations. Anti-takeover effects of our certificate and bylaws and Delaware law Upon the closing of this offering, some provisions of Delaware law and our certificate of incorporation and bylaws could make the following more difficult: . acquisition of Broadband Sports by means of a tender offer; . acquisition of Broadband Sports by means of a proxy contest or otherwise; or . removal of our incumbent officers and directors. These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging such proposals because negotiation of such proposals could result in an improvement of their terms. Election and Removal of Directors. Our board of directors is divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders. For more information on the classified board, see the section entitled "Management--Board Composition." This system of electing and removing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of us because it generally makes it more difficult for stockholders to replace a majority of the directors. Stockholder Meetings. Under our bylaws, only the board of directors, the chairman of the board and the president may call special meetings of stockholders. Requirements for Advance Notification of Stockholder Nominations and Proposals. Our bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors. Delaware Anti-Takover Law. We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date the person became an interested stockholder, unless the "business combination" or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a "business combination" includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an "interested stockholder" is a person who, together with affiliates and associates, owns or within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporation's voting stock. The existence of this provision may have an anti- takeover effect with respect to transactions not 80

approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders. Elimination of Stockholder Action By Written Consent. Our certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting. Elimination of Cumulative Voting. Our certificate of incorporation and bylaws do not provide for cumulative voting in the election of directors. Cumulative voting provides for a minority stockholder to vote a portion or all of its shares for one or more candidates for seats on the board of directors. Without cumulative voting, a minority stockholder will not be able to gain as many seats on our board of directors based on the number of shares of our stock that such stockholder holds than if cumulative voting were permitted. The elimination of cumulative voting makes it more difficult for a minority stockholder to gain a seat on our board of directors to influence the board of directors' decision regarding a takeover. Undesignated Preferred Stock. The authorization of undesignated preferred stock makes it possible for the board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of Broadband Sports. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of Broadband Sports. Amendment of Charter Provisions. The amendment of any of the above provisions would require approval by holders of at least 66 2/3% of the outstanding common stock. Limitation of Liability and Indemnification Matters Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that our directors are not personally liable for monetary damages to us or our stockholders for breach of fiduciary duties as a director, except for liability for: . any breach of the duty of loyalty to us or our stockholders; . acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; . an act related to the unlawful stock repurchase or payment of a dividend under Section 174 of Delaware General Corporation Law; or . any transaction from which the director derived an improper personal benefit. The limitation of liability provided in the certificate of incorporation does not affect the availability of equitable remedies such as injunctive relief or rescission. Indemnification Agreements. Our certificate of incorporation and bylaws authorize us to indemnify our directors, officers, employees and other agents, by agreements or otherwise, to the fullest extent permitted under Delaware law. We plan to enter into separate indemnification agreements with our directors and officers which may, in some cases, be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements may require us, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers, to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain directors' and officers' insurance if available on reasonable terms. 81

Indemnification under Bylaws. Our bylaws require us to indemnify our directors, officers, employees and other agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence on the part of the indemnified party. Indemnification under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors and officers and persons that control us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Pending indemnification proceedings. At present, there is no pending litigation or proceeding involving any of our directors, officers, employees or other agents where indemnification will be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification. Registration Rights of Certain Holders After this offering, the holders of approximately 248,120,386 shares of common stock will be entitled to certain rights to register these shares under the Securities Act of 1933 pursuant to an investors' rights agreement. These holders all have "Piggyback" rights. If we propose to register any of our common stock for our own account or for the account of other security holders, the holders of these 248,120,386 shares of common stock are entitled to notice of such registration and are entitled to include their shares in the registration, subject to the ability of underwriters to limit the number of shares included in the offering. Subject to certain limitations in the investors' rights agreement, the holders of an aggregate of 91,166,663 shares of common stock are also entitled to demand registration rights pursuant to which the holders of at least a majority of such shares may require us to use our best efforts to register such shares for public resale. Any holder or holders of such shares may also require us to register all or a portion of their registrable securities on Form S-3 when we are eligible to use that form, provided, among other limitations, that the proposed aggregate price to the public is at least $500,000 and that we shall not have effected two of these in any 12-month period. We will bear all fees, costs and expenses of such registrations, other than underwriting discounts and commissions. Transfer Agent and Registrar The transfer agent and registrar for our common stock is . Its address is and its telephone number at this location is . Listing We have applied to have the shares of common stock approved for quotation on the Nasdaq National Market under the symbol "BBND." 82

SHARES ELIGIBLE FOR FUTURE SALE Prior to this offering, there has been no market for our common stock, and there can be no assurance that a significant public market for our common stock will develop or be sustained after this offering. Future sales of substantial amounts of our common stock, including shares issued upon exercise of outstanding options and warrants, in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities. Upon completion of this offering, based on the number of shares outstanding on November 15, 1999, we will have outstanding shares of common stock, shares if the underwriters exercise their over-allotment option in full, assuming no exercise of outstanding warrants and options. Of these shares, shares, plus an additional shares if the underwriters exercise their over-allotment option in full, of common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless purchased by our affiliates. Of the remaining shares, a total of approximately shares held by our directors, officers and shareholders are subject to "lock-up" agreements generally providing that, these shareholders will not (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock, whether any of these transactions described in (1) or (2) are to be settled by delivery of common stock or such other securities, in cash or otherwise, for a period of 180 days following the date of the final prospectus for this offering without the prior written consent of Morgan Stanley & Co. Incorporated. The restrictions described in this paragraph do not apply to: . the sale to the underwriters of the shares of common stock to be sold in the offering; . the issuance by us of shares of common stock upon the exercise of an existing option or an existing warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing; . transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares; or . issuances of certain shares of common stock or options to purchase shares of common stock pursuant to our employee benefit plans as in existence on the date of this prospectus. In general, under Rule 144 as currently in effect, beginning 90 days after the date of this prospectus, a person or persons whose shares are aggregated, who has beneficially owned restricted shares for at least one year, including the holding period of any prior owner except an affiliate, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of (1) 1% of the number of shares of common stock then outstanding, which will equal approximately shares immediately after this offering or (2) the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 also are subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not 83

deemed to have been an affiliate of Broadband Sports at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years, including the holding period of any prior owner except an affiliate, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Rule 701 permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions, including the holding period requirement, of Rule 144. Any employee, officer or director of or consultant to Broadband Sports who purchased his or her shares pursuant to a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell such shares in reliance on Rule 144 without having to comply with the holding period, public information, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling such shares. As of the effective date of the registration statement, holders of 248,120,386 shares of common stock will be entitled to "piggyback" registration rights with respect to their shares. Holders of 91,166,663 of these shares can also require Broadband Sports to register their shares at any time following 180 days after the date of this prospectus, subject to certain conditions. 84

UNDERWRITERS Under the terms and subject to the conditions contained in the underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. Incorporated, Hambrecht & Quist LLC and SG Cowen Securities Corporation are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the respective number of shares of common stock set forth opposite the names of the underwriters below: <TABLE> <CAPTION> Number of Name Shares ---- --------- <S> <C> Morgan Stanley & Co. Incorporated................................. Hambrecht & Quist LLC............................................. SG Cowen Securities Corporation................................... --- Total............................................................ === </TABLE> The underwriters are offering the shares subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered hereby are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any shares are taken. However, the underwriters are not required to take or pay for the share covered by the underwriters over-allotment option described below. The underwriters initially propose to offer part of the shares of common stock directly to the public at the public offering price set forth on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $ a share under the public offering price. Any underwriters may allow, and such dealers may reallow, a concession not in excess of $ a share to other underwriters or to certain other dealers. After the initial offering of the shares of common stock, the offering price and other selling terms may from time to time be varied by the representatives of the underwriters. We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to an aggregate of additional shares of common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise such option solely for the purpose of covering over- allotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent such option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase approximately the same percentage of the additional shares of common stock as the number listed next to such underwriter's name in the preceding table bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table. At our request, the underwriters have reserved up to shares of common stock to be issued by us and offered hereby for sale, at the initial public offering price, to directors, officers, employees, business associates and persons related to us. The number of shares of common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus. Pursuant to the regulations of the National Association of Securities Dealers, Inc., certain purchasers of the reserved shares may have to agree not to sell, transfer, assign or hypothecate their shares for a period of 90 days after the date of this prospectus. 85

The underwriters have informed us that they do not intend sales to discretionary accounts to exceed five percent of the total number of shares of common stock offered by them. We, the directors, officers, shareholders and certain optionholders of ours have agreed that, without the prior written consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters, we will not, during the period ending 180 days after the date of this prospectus, directly or indirectly: . offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock; or . enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of common stock. Any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise, after the date of this prospectus. The restrictions described in the previous paragraph do not apply to: . the sale to the underwriters of the shares of common stock to be sold in the offering; . the issuance by us of shares of common stock upon the exercise of an existing option or an existing warrant or the conversion of a security outstanding on the date of this prospectus, of which the underwriters have been advised in writing; . transactions by any person other than us relating to shares of common stock or other securities acquired in open market transactions after the completion of the offering of the shares; or . issuances of certain shares of common stock or options to purchase shares of common stock pursuant to our employee benefit plans as in existence on the date of this prospectus. In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may over-allot in connection with the offering, creating a short position in the common stock for their own account. In addition, to cover over-allotments or to stabilize the price of the common stock, the underwriters may bid for, and purchase, shares of common stock in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the common stock in the offering if the syndicate repurchases previously distributed shares of common stock in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the common stock above independent market levels. The underwriters are not required to engage in these activities and may end any of these activities at any time. We have applied to have the shares of common stock approved for quotation on the Nasdaq National Market under the symbol "BBND." We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act. Pricing of the Offering Prior to this offering, there has been no public market for the common stock. The public offering price for the shares of common stock will be determined by negotiations between us and the 86

representatives of the underwriters. Among the factors to be considered in determining the public offering price will be our record of operations, our current financial position and future prospects and our industry in general, the experience of our management, sales, earnings and certain of our other financial and operating information in recent periods, the price-earnings ratios, price-sales ratios, market prices of securities and certain financial and operating information of companies engaged in activities similar to ours. The estimated public offering price range set forth on the cover page of this prospectus is subject to change as a result of market conditions and other factors. LEGAL MATTERS The validity of the common stock offered hereby will be passed upon by Morrison & Foerster LLP, Palo Alto, California. Certain matters in connection with this offering will be passed upon for the Underwriters by Cooley Godward LLP, San Francisco, California. Upon the completion of this offering, certain attorneys of Morrison & Foerster LLP will beneficially own an aggregate of 283,332 shares of our common stock. EXPERTS The consolidated financial statements of Broadband Sports, Inc. as of December 31, 1998 and for the ten months ended December 31, 1998 and the combined financial statements of the Predecessor Companies as of December 31, 1997 and for the period February 1, 1996 to December 31, 1996, the year ended December 31, 1997 and the two months ended February 27, 1998 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. ADDITIONAL INFORMATION Broadband Sports has filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules that are a part of the registration statement which are omitted in accordance with the rules and regulations of the Commission. For further information with respect to Broadband Sports and the common stock, reference is made to the registration statement and the exhibits and schedules that are a part of the registration statement. With respect to statements contained in this prospectus as to the contents of any agreement or other document in each instance reference is made to the copy of such agreement or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by such reference. You may read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information about the public reference rooms. Our SEC filings are also available to the public from the SEC's Web site at http://www.sec.gov. Upon completion of this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934, and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference rooms and the SEC's Web site, which is described above. 87

INDEX TO FINANCIAL STATEMENTS <TABLE> <CAPTION> Page ---- <S> <C> Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1998....................................................... F-3 Unaudited Pro Forma Condensed Combined Statement of Operations for the Nine Months Ended September 30, 1999................................................ F-4 Notes to Unaudited Pro Forma Condensed Combined Financial Statements..... F-5 Broadband Sports, Inc. Report of Independent Auditors........................................... F-6 Combined Balance Sheet of the Predecessor Companies at December 31, 1997, the Consolidated Balance Sheets at December 31, 1998 and September 30, 1999 (Unaudited) and September 30, 1999 Pro Forma (Unaudited)........... F-7 Combined Statements of Operations of the Predecessor Companies for the Period from February 1, 1996 to December 31, 1996, the Year Ended December 31, 1997 and the Two Months ended February 27, 1998 and the Consolidated Statements of Operations of the Company for the Ten Months ended December 31, 1998, the Seven Months ended September 30, 1998 (Unaudited) and the Nine Months ended September 30, 1999 (Unaudited).... F-8 Combined Statements of Cash Flows of the Predecessor Companies for the Period from February 1, 1996 to December 31, 1996, the Year ended December 31, 1997 and the Two Months ended February 27, 1998 and the Consolidated Statements of Cash Flows of the Company for the Ten Months ended December 31, 1998, the Seven Months ended September 30, 1998 (Unaudited) and the Nine Months ended September 30, 1999 (Unaudited).... F-9 Consolidated Statements of Owners' Equity of the Predecessor Companies for the Period from February 1, 1996 to December 31, 1996, the Year ended December 31, 1997 and the Two Months ended February 27, 1998 and the Consolidated Statements of Stockholders' Deficit of the Company for the Ten Months ended December 31, 1998 and the Nine Months ended September 30, 1999 (Unaudited).......................................... F-10 Notes to Consolidated and Combined Financial Statements.................. F-11 </TABLE> F-1

Unaudited Pro Forma Condensed Combined Financial Information The unaudited pro forma condensed combined financial information for Broadband Sports, Inc. (Broadband Sports) set forth below gives effect to: . the acquisition on February 27, 1998 of Athlete Direct, Inc. (Athlete Direct) and Pro Sports Xchange, Inc. (PSX); and . conversion of the series B preferred stock; and . repayment of the revolving loan due to stockholder; and . the issuance and conversion of series C preferred stock; and . the issuance of 30,389,809 shares of common stock in November 1999. The historical financial information set forth below has been derived from the consolidated financial statements of Broadband Sports and the combined financial statements of the Predecessor Companies and should be read in conjunction with those financial statements and the notes thereto included elsewhere herein. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 1998 set forth below gives effect to the acquisitions of Athlete Direct and PSX and the repayment of the revolving loan due to stockholder as if these transactions occurred at the beginning of the period presented. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 1999 set forth below gives effect to the repayment of the revolving loan due to stockholder as if this transaction occurred at the beginning of the period presented. The information set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements of Broadband Sports and the combined financial statements of the Predecessor Companies which are included elsewhere herein. The unaudited pro forma condensed combined financial information set forth below does not purport to represent what would actually have been if the acquisitions had in fact occurred on such date or to project the future consolidated results of operations of Broadband Sports. F-2

Broadband Sports, Inc. Unaudited Pro Forma Condensed Combined Statement of Operations Year Ended December 31, 1998 <TABLE> <CAPTION> Broadband Sports, Predecessor Inc. Ten Companies Months Two Months ended ended December February 27, Pro Forma Pro Forma 31, 1998 1998 Combined Adjustments Combined ----------- ------------ ----------- ----------- ----------- (Note 1) (Note 2) (Note 3) <S> <C> <C> <C> <C> <C> Revenues................ $ 2,718,628 $ 507,224 $ 3,225,852 $ -- $ 3,225,852 Cost of revenues........ 2,035,669 296,401 2,332,070 -- 2,332,070 ----------- --------- ----------- -------- ----------- Gross profit ........... 682,959 210,823 893,782 -- 893,782 Operating expenses: Sales and marketing... 592,102 69,290 661,392 -- 661,392 Product development... 136,682 8,822 145,504 -- 145,504 General and administrative....... 1,536,967 136,117 1,673,084 -- 1,673,084 Depreciation.......... 43,246 3,678 46,924 -- 46,924 Amortization.......... 2,657,071 149,613 2,806,684 48,751(a) 2,855,435 ----------- --------- ----------- -------- ----------- Total operating expenses............... 4,966,068 367,520 5,333,588 48,751 5,382,339 ----------- --------- ----------- -------- ----------- Operating loss.......... (4,283,109) (156,697) (4,439,806) (48,751) (4,488,557) Interest income......... -- -- -- -- -- Interest expense........ (66,962) -- (66,962) 66,962(b) -- Other expense........... (5,708) -- (5,708) -- (5,708) ----------- --------- ----------- -------- ----------- Net loss................ $(4,355,779) $(156,697) $(4,512,476) $ 18,211 $(4,494,265) =========== ========= =========== ======== =========== Historical loss per share-- basic and diluted...... $ (0.02) =========== Weighted average common and common equivalent shares outstanding-- basic and diluted...... 217,037,500 =========== Pro forma loss per share-- basic and diluted (Note 4)............. $ (0.02) =========== Weighted average common and common equivalent shares outstanding-- basic and diluted (Note 4)..................... 295,093,972 =========== </TABLE> F-3

Broadband Sports, Inc. Unaudited Pro Forma Condensed Combined Statement of Operations Nine Months Ended September 30, 1999 <TABLE> <CAPTION> Broadband Sports, Pro Forma Pro Forma Inc. Adjustments Combined ----------- ----------- ----------- (Note 3) <S> <C> <C> <C> Revenues.............................. $ 5,724,646 $ -- $ 5,724,646 Cost of revenues...................... 3,811,427 -- 3,811,427 ----------- -------- ----------- Gross profit.......................... 1,913,219 -- 1,913,219 Operating expenses: Sales and marketing................. 4,487,799 -- 4,487,799 Product development................. 713,859 -- 713,859 General and administrative.......... 4,098,004 -- 4,098,004 Depreciation........................ 268,490 -- 268,490 Amortization........................ 2,188,674 -- 2,188,674 ----------- -------- ----------- Total operating expenses.............. 11,756,826 -- 11,756,826 ----------- -------- ----------- Operating loss........................ (9,843,607) (9,843,607) Interest income....................... 199,501 -- 199,501 Interest expense...................... (244,419) 244,419(b) -- ----------- -------- ----------- Net loss.............................. $(9,888,525) $244,419 $(9,644,106) =========== ======== =========== Historical loss per share-- basic and diluted.................... $ 0.05 =========== Weighted average common and common equivalent shares outstanding--basic and diluted.......................... 217,037,500 =========== Pro forma loss per share-- basic and diluted (Note 4).......... $ 0.03 =========== Weighted average common and common equivalent shares outstanding--basic and diluted (Note 4)................. 295,093,972 =========== </TABLE> F-4

Broadband Sports, Inc. Notes to Unaudited Pro Forma Condensed Combined Financial Statements Note 1 -- General Broadband Sports was founded in February 1998 to provide sports content and commerce to distinct sports communities online. The historical financial statements reflect the financial position and results of operations of Broadband Sports. The unaudited pro forma combined financial statements include the results of operations of Broadband Sports and the Predecessor Companies for the nine months ended September 30, 1999 and for the year ended December 31, 1998. Note 2 -- Predecessor Companies On February 27, 1998, the Company purchased all of the outstanding common stock of Athlete Direct and PSX for a combined purchase price of $2,209,964. The acquisitions have been accounted for as purchase transactions. Note 3 -- Unaudited Pro Forma Combined Statement of Operations Adjustments (a) Represents additional amortization in connection with the acquisitions of the predecessor companies for the two months ended February 27, 1998. (b) Represents elimination of interest expense on the revolving loan due to stockholder. Note 4 -- Loss Per Share Pro forma loss per share on a pro forma combined basis takes effect for the conversion of the series B preferred stock, the issuance and conversion of the series C preferred stock, the issuance of 30,389,809 shares of common stock in November 1999, and the repayment of the outstanding balance on the revolving loan due to stockholder. F-5

Report of Independent Auditors The Board of Directors Broadband Sports, Inc. We have audited the accompanying combined balance sheet of the Predecessor Companies as of December 31, 1997 and the consolidated balance sheet of Broadband Sports, Inc. (the "Company") as of December 31, 1998 and the related combined statements of operations, owners' equity, and cash flows of the Predecessor Companies for the period February 1, 1996 to December 31, 1996, the year ended December 31, 1997 and the two months ended February 27, 1998 and the consolidated statements of operations, stockholders' deficit, and cash flows of the Company for the ten months ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Predecessor Companies at December 31, 1997 and the financial position of the Company at December 31, 1998 and the results of operations and cash flows of the Predecessor Companies for the period February 1, 1996 to December 31, 1996, the year ended December 31, 1997 and the two months ended February 27, 1998 and the results of operations and cash flows of the Company for the ten months ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Los Angeles, California April 4, 1999 F-6

Broadband Sports, Inc. Consolidated Balance Sheets and the Predecessor Companies Combined Balance Sheets <TABLE> <CAPTION> Predecessor Pro Forma Companies September September December 31, December 30, 30, 1997 31, 1998 1999 1999 ------------ ----------- ------------ ------------ (Unaudited) (Unaudited) (See Notes 1 and 11) <S> <C> <C> <C> <C> Assets Current assets: Cash and cash equivalents........... $ 53,356 $ 212,997 $ 9,320,484 $ 7,035,484 Investments............ -- 51,588 51,588 51,588 Accounts receivable.... 199,295 262,208 788,285 788,285 Advances and deferred incentives............ 631,010 421,414 326,430 326,430 Inventory.............. 4,002 17,223 158,712 158,712 Prepaid expenses and other current assets.. 39,454 33,929 1,302,677 1,302,677 ---------- ----------- ------------ ------------ Total current assets.............. 927,117 999,359 11,948,176 9,663,176 Fixed assets, net........ 51,632 200,099 1,812,327 1,812,327 Goodwill, net............ -- 633,762 619,057 619,057 Advances and deferred incentives.............. 989,060 503,509 891,959 891,959 Other assets............. 3,285 19,324 137,821 137,821 ---------- ----------- ------------ ------------ Total assets......... $1,971,094 $ 2,356,053 $ 15,409,340 $ 13,124,340 ========== =========== ============ ============ Liabilities and stockholders'/owners' equity (deficit) Current liabilities Accounts payable....... $ 68,763 $ 153,364 $ 511,990 $ 511,990 Accrued liabilities.... 225,145 438,540 2,028,765 2,028,765 Deferred revenue....... 46,500 4,000 -- -- ---------- ----------- ------------ ------------ Total current liabilities......... 340,408 595,904 2,540,755 2,540,755 Revolving loan due to stockholder............. -- 1,998,085 4,468,085 4,468,085 Commitments and contingencies (Note 9) Mandatorily redeemable series A preferred stock, $0.001 par value, no shares authorized at December 31, 1997; 2,000,000 shares authorized, issued and outstanding December 31, 1998, September 30, 1999; none issued or outstanding pro forma... -- 2,150,000 2,285,000 -- Stockholders'/owners' equity (deficit): Series B convertible preferred stock; $0.001 par value, no shares authorized December 31, 1997 and 1998; 34,000,000 shares authorized, 29,166,663 shares issued and outstanding September 30, 1999; none issued or outstanding pro forma................. -- -- 16,519,487 -- Common stock, $0.001 par value; no shares authorized, issued or outstanding at December 31, 1997; 235,294,118 shares authorized, 217,037,500 issued and outstanding at December 31, 1998; 300,000,000 shares authorized, 217,037,500 issued and outstanding at September 30, 1999; 246,204,163 issued and outstanding pro forma................. -- 217,038 217,038 246,204 Additional paid-in capital............... -- 3,554,994 6,106,753 22,597,074 Deferred compensation.. -- (1,804,189) (2,483,474) (2,483,474) Accumulated deficit.... -- (4,355,779) (14,244,304) (14,244,304) Owners' equity......... 1,630,686 -- -- -- ---------- ----------- ------------ ------------ Total stockholders' equity (deficit).... 1,630,686 (2,387,936) 6,115,500 6,115,500 ---------- ----------- ------------ ------------ Total liabilities and stockholders' equity.............. $1,971,094 $ 2,356,053 $ 15,409,340 $ 13,124,340 ========== =========== ============ ============ </TABLE> See accompanying notes to consolidated financial statements. F-7

Broadband Sports, Inc. Consolidated Statements of Operations and the Predecessor Companies Combined Statements of Operations <TABLE> <CAPTION> Predecessor Companies -------------------------------------- Period from February 1, Two months Ten months Seven months Nine months 1996 to Year ended ended ended ended ended December 31, December 31, February 27, December 31, September 30, September 30, 1996 1997 1998 1998 1998 1999 ------------ ------------ ------------ ------------ ------------- ------------- (Unaudited) <S> <C> <C> <C> <C> <C> <C> Revenues................ $ 218,675 $1,873,930 $ 507,224 $ 2,718,628 $ 1,908,170 $ 5,724,646 Cost of revenues........ 413,352 1,300,062 296,401 2,035,669 1,405,291 3,811,427 --------- ---------- --------- ----------- ----------- ----------- Gross profit (loss)..... (194,677) 573,868 210,823 682,959 502,879 1,913,219 Operating expenses: Sales and marketing... 4,241 154,487 69,290 592,102 209,212 4,487,799 Product development... 7,875 22,000 8,822 136,682 85,361 713,859 General and administrative....... 97,041 671,946 136,117 1,536,967 1,066,509 4,098,004 Depreciation.......... 2,780 15,195 3,678 43,246 25,660 268,490 Amortization.......... 52,409 413,510 149,613 2,657,071 2,020,198 2,188,674 --------- ---------- --------- ----------- ----------- ----------- Total operating expenses............... 164,346 1,277,138 367,520 4,966,068 3,406,940 11,756,826 --------- ---------- --------- ----------- ----------- ----------- Operating loss.......... (359,023) (703,270) (156,697) (4,283,109) (2,904,061) (9,843,607) Interest income......... 244 3,056 -- -- -- 199,501 Interest expense........ -- -- -- (66,962) (34,702) (244,419) Other expense........... -- -- -- (5,708) (5,875) -- --------- ---------- --------- ----------- ----------- ----------- Net loss................ $(358,779) $ (700,214) $(156,697) $(4,355,779) $(2,944,638) $(9,888,525) ========= ========== ========= =========== =========== =========== Historical loss per share-- basic and diluted................ $ 0.02 $ 0.01 $ 0.05 =========== =========== =========== Pro forma historical loss per share--basic and diluted ........... $ 0.02 $ 0.01 $ 0.04 =========== =========== =========== Weighted average common and common equivalent shares outstanding Historical............ 217,037,500 217,037,500 217,037,500 =========== =========== =========== Pro forma............. 246,204,163 246,204,163 246,204,163 =========== =========== =========== </TABLE> See accompanying notes to consolidated financial statements. F-8

Broadband Sports, Inc. Consolidated Statements of Cash Flows and the Predecessor Companies Combined Statements of Cash Flows <TABLE> <CAPTION> Predecessor Companies -------------------------------------- Period from February 1, Two months Ten months Seven months Nine months 1996 to Year ended ended ended ended ended December 31, December 31, February 27, December 31, September 30, September 30, 1996 1997 1998 1998 1998 1999 ------------ ------------ ------------ ------------ ------------- ------------- (Unaudited) <S> <C> <C> <C> <C> <C> <C> Operating activities Net loss................ $(358,779) $(700,214) $(156,697) $(4,355,779) $(2,944,638) $(9,888,525) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization of goodwill.............. 2,780 15,195 3,678 287,000 196,285 537,269 Amortization of deferred compensation and deferred incentives............ 52,409 413,510 149,613 2,413,317 1,849,573 1,919,895 Stock compensation expense............... -- -- -- 8,519 8,519 -- Changes in operating assets and liabilities: Accounts receivable.... (26,798) (172,497) 16,643 (79,556) (107,187) (526,077) Inventory.............. -- (4,002) (1,925) (11,296) (8,363) (141,489) Prepaid expenses and other assets.......... (5,762) (37,619) 12,000 (22,514) (14,087) (1,242,958) Advances and deferred incentives............ -- -- -- -- (52,173) (350,174) Accounts payable....... -- 68,763 45,596 39,005 64,300 358,626 Accrued liabilities.... 75,458 149,687 (61,605) 275,000 317,548 1,590,225 Deferred revenue....... 187,500 (141,000) (43,500) 1,000 (3,000) (4,000) --------- --------- --------- ----------- ----------- ----------- Net cash used in operating activities... (73,192) (408,177) (36,197) (1,445,304) (693,223) (7,747,208) Investing activities Purchase of property and equipment.............. (29,936) (39,029) (5,278) (190,113) (158,360) (1,878,718) Acquisitions, net of cash acquired.......... -- -- -- (2,198,083) (2,198,083) (256,074) Purchase of investments............ -- -- -- (51,588) (50,939) -- --------- --------- --------- ----------- ----------- ----------- Net cash used in investing activities... (29,936) (39,029) (5,278) (2,439,784) (2,407,382) (2,134,792) Financing activities Capital contributions... 360,953 242,737 -- -- -- -- Issuance of common stock.................. -- -- -- 100,000 100,000 -- Issuance of mandatorily redeemable preferred stock.................. -- -- -- 2,000,000 2,000,000 -- Issuance of preferred stock.................. -- -- -- -- -- 16,519,487 Proceeds from revolving loan due to stockholder............ -- -- -- 1,998,085 1,053,000 2,470,000 --------- --------- --------- ----------- ----------- ----------- Net cash provided by financing activities... 360,953 242,737 -- 4,098,085 3,153,000 18,989,487 --------- --------- --------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents............ 257,825 (204,469) (41,475) 212,997 52,395 9,107,487 Cash and cash equivalents at beginning of the period................. -- 257,825 53,356 -- -- 212,997 --------- --------- --------- ----------- ----------- ----------- Cash and cash equivalents at end of the period............. $ 257,825 $ 53,356 $ 11,881 $ 212,997 $ 52,395 $ 9,320,484 ========= ========= ========= =========== =========== =========== Supplemental disclosure of cash flow information: Cash paid for: Interest............... $ -- $ -- $ -- $ 33,605 $ 17,241 $ 201,502 ========= ========= ========= =========== =========== =========== Income taxes........... $ -- $ -- $ -- $ -- $ -- $ 2,400 ========= ========= ========= =========== =========== =========== </TABLE> See accompanying notes to consolidated financial statements. F-9

Broadband Sports, Inc. Consolidated Statements of Stockholders' Deficit and the Predecessor Companies Combined Statements of Owners' Equity <TABLE> <CAPTION> Series B Preferred Stock Common Stock Additional ---------------------- -------------------- Paid-in Deferred Owners' Accumulated Shares Amount Shares Amount Capital Compensation Equity Deficit Total ---------- ----------- ----------- -------- ---------- ------------ ----------- ------------ ----------- <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> Balance at February 1, 1996............ -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ -- Capital contributions.. -- -- -- -- -- -- 360,953 -- 360,953 Deferred incentives..... -- -- -- -- -- -- 907,083 -- 907,083 Net loss........ -- -- -- -- -- -- (358,779) -- (358,779) ---------- ----------- ----------- -------- ---------- ----------- ----------- ------------ ----------- Balance at December 31, 1996............ -- -- -- -- -- -- 909,257 -- 909,257 Capital contributions.. -- -- -- -- -- -- 242,737 -- 242,737 Deferred compensation and incentives ............... -- -- -- -- -- -- 1,051,034 -- 1,051,034 Amortization of deferred compensation .. -- -- -- -- -- -- 127,872 -- 127,872 Net loss........ -- -- -- -- -- -- (700,214) -- (700,214) ---------- ----------- ----------- -------- ---------- ----------- ----------- ------------ ----------- Balance at December 31, 1997............ -- -- -- -- -- -- 1,630,686 -- 1,630,686 Deferred compensation and incentives..... -- -- -- -- -- -- 51,833 -- 51,833 Amortization of deferred compensation .. -- -- -- -- -- -- 42,743 -- 42,743 Net income...... -- -- -- -- -- -- (156,697) -- (156,697) ---------- ----------- ----------- -------- ---------- ----------- ----------- ------------ ----------- Balance at February 27, 1998............ -- $ -- -- $ -- $ -- $ -- $ 1,568,565 $ -- $ 1,568,565 ========== =========== =========== ======== ========== =========== =========== ============ =========== Issuance of common stock... -- $ -- 200,000,000 $200,000 $ (100,000) $ -- $ -- $ 100,000 Issuance of common stock... -- -- 17,037,500 17,038 (8,519) -- -- 8,519 Deferred compensation and incentives..... -- -- -- -- 3,813,513 (3,760,680) -- 52,833 Amortization of deferred compensation... -- -- -- -- -- 1,956,491 -- 1,956,491 Accretion of dividends payable for mandatorily redeemable series A preferred stock.......... -- -- -- -- (150,000) -- -- (150,000) Net loss........ -- -- -- -- -- -- (4,355,779) (4,355,779) ---------- ----------- ----------- -------- ---------- ----------- ------------ ----------- Balance at December 31, 1998............ -- -- 217,037,500 217,038 3,554,994 (1,804,189) (4,355,779) (2,387,936) Issuance of Series B Preferred Stock (unaudited)..... 29,166,663 16,519,487 -- -- -- -- -- 16,519,487 Issuance of warrant......... -- -- -- -- 144,287 -- -- 144,287 Deferred compensation and incentives (unaudited)..... -- -- -- -- 2,542,472 (2,274,532) -- 267,940 Amortization of deferred compensation (unaudited)..... -- -- -- -- -- 1,595,247 -- 1,595,247 Accretion of dividends payable for mandatorily redeemable series A preferred stock (unaudited)..... -- -- -- -- (135,000) -- -- (135,000) Net loss (unaudited)..... -- -- -- -- -- -- (9,888,525) (9,888,525) ---------- ----------- ----------- -------- ---------- ----------- ------------ ----------- Balance at September 30, 1999............ 29,166,663 $16,519,487 217,037,500 $217,038 $6,106,753 $(2,483,474) $(14,244,304) $ 6,115,500 ========== =========== =========== ======== ========== =========== ============ =========== </TABLE> See accompanying notes to consolidated financial statements. F-10

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) December 31, 1998 1. Company Formation, Business and Basis of Presentation Broadband Sports, Inc. (Broadband Sports or the Company) was incorporated in the state of Delaware on February 20, 1998 and commenced operations on February 28, 1998. Athlete Direct began operations in September 1996. Pro Sports Xchange LLC began operations in February 1996. In connection with the formation of Broadband Sports, Athlete Direct, Inc. (AD or Athlete Direct) and Pro Sports Xchange, Inc. (PSX or Pro Sports Xchange) were incorporated on February 27, 1998. On February 27, 1998, Athlete Direct LLC was merged with and into Athlete Direct, Inc. and each 1% membership interest was exchanged for 700,000 shares of common stock of Athlete Direct, Inc. On February 27, 1998, Pro Sports Xchange LLC was merged with and into Pro Sports Xchange, Inc. and each 1% membership interest was exchanged for 1,000,000 shares of common stock of Pro Sports Xchange, Inc. On February 27, 1998, Broadband Sports purchased all of the outstanding common stock of Athlete Direct, Inc. and Pro Sports Xchange, Inc. for a combined purchase price of $2,209,964 (including acquisition costs of $169,964), The acquisitions have been accounted for as purchase transactions; accordingly, the fair value assigned in each acquisition was allocated to the net assets acquired based on their estimated fair market values. The determination of the aggregate cost in excess of net assets acquired is set forth below: <TABLE> <S> <C> Current assets.................................................. $ 765,012 Non-current assets.............................................. 848,335 Cost in excess of net assets acquired........................... 877,516 Current liabilities............................................. 277,899 Non-current liabilities......................................... 3,000 </TABLE> The cost in excess of net assets acquired in the acquisitions has been allocated to goodwill and is being amortized using the straight-line method over three years. The accompanying consolidated financial statements include the results of operations since the effective date of the acquisitions. Through its wholly-owned subsidiary, PSX, the Company, through its network of local and regional sports writers, produces original, in-depth content covering major professional sports (e.g. football, baseball, basketball, and hockey) as well as major Division I College Sports (e.g. basketball and football). Through its wholly-owned subsidiary, Athlete Direct, the Company develops and aggregates individual athlete sites under the Athlete Direct branded network, creating an online destination for sports fans to obtain information about, interact with, and purchase products relating to their favorite athletes. The Company currently derives its revenue from four major revenue streams: content syndication, advertising, electronic commerce and subscriptions. F-11

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 1. Company Formation, Business and Basis of Presentation--(Continued) The Company has only a limited operating history and its prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. These risks include, among others, the Company's ability to provide compelling sports-related content and commerce, maintain existing and develop new strategic relationships, publicly release the www.athletedirect.com website, achieve and maintain projected levels of online traffic, build an electronic commerce infrastructure, increase its fulfillment capabilities and extend its brands. Pro Forma Information (unaudited) The following unaudited pro forma condensed consolidated financial information is presented to show the results of the Company as if the acquisitions of Pro Sports Xchange and Athlete Direct had occurred at the beginning of the periods presented. The pro forma results include adjustments for the additional amortization of goodwill. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the acquisitions been effective at the beginning of the periods presented. <TABLE> <CAPTION> Nine months Years ended ended December 31, September 30, ------------------------- ----------------- 1997 1998 1998 ----------- ------------ ------------ (Unaudited) <S> <C> <C> <C> <C> Revenues...................... $ 1,873,930 $ 3,225,852 $ 2,415,394 Net loss...................... $ (992,719) $ (4,561,227) $ (3,150,086) Basic and diluted loss per share........................ $ (0.00) $ (0.02) $ (0.01) </TABLE> Basis of Presentation The consolidated financial statements as of December 31, 1998 and for the ten months then ended, include the accounts of Broadband Sports and its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated. The combined financial statements of Athlete Direct LLC and Pro Sports Xchange LLC (the "Predecessor Companies") as of December 31, 1997 and for the period from February 1, 1996 through December 31, 1996 and for the year ended December 31, 1997 and the two months ended February 27, 1998, have been prepared on a combined basis due to the respective companies' common ownership. All capital contributions to the Predecessor Companies from the LLC members have been recorded as owner's equity in stockholders' equity. Earnings per share have not been presented for the Predecessor Companies as the presentation would not be meaningful due to the significant change in the capital structure of the Predecessor Companies following their acquisitions. All significant balances and transactions between the Predecessor Companies have been eliminated in the combined financial F-12

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 1. Company Formation, Business and Basis of Presentation--(Continued) statements. The financial statements of the Predecessor Companies do not necessarily reflect the results of operations or financial position that would have existed had the companies operated as a single consolidated entity. The pro forma balance sheet at September 30, 1999 has been presented to reflect the conversion of series B convertible preferred stock and the redemption of the mandatorily redeemable series A preferred stock in connection with the change in capitalization that will occur upon the occurrence of an initial public offering with net proceeds to the Company that exceed $15,000,000 (for Series B conversion) or $10,000,000 (for Series A redemption). 2. Significant Accounting Policies Unaudited Interim Financial Information The financial information as of September 30, 1999 and for the nine months ended September 30, 1999 and the seven months ended September 30, 1998, is unaudited but includes all adjustments consisting of only normal recurring adjustments that the Company considers necessary for a fair presentation of the financial position at such dates and the results of operations and cash flows for the periods then ended. Operating results for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 are not necessarily indicative of results that may be expected for the entire year. Revenue Recognition Content syndication revenue is recognized over the period of the content syndication agreement as the Company delivers its content provided there are no further obligations. Advertising revenue is recognized ratably over the period in which the advertising is displayed, provided that no significant obligations remain and collection of the resulting receivable is probable. Company obligations may include guarantees of a minimum number of "impressions" or times that an advertisement appears in page views downloaded by users. Revenue from electronic commerce is recognized once the product has been shipped and collection of the resulting receivable is probable. Subscription revenue is recognized ratably over the subscription period, which is often a professional sports season. Subscriptions are charged directly to the customers' credit card and are billed in advance. Accordingly, amounts received for which services have not yet been provided are recorded as deferred revenues. To date, revenue and expenses from any barter transactions are recognized at fair value when the Company has a history of receiving or paying cash for similar transactions. F-13

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 2. Significant Accounting Policies--(Continued) Sales and Marketing Advertising costs are expensed as incurred. Advertising costs for the ten months ended December 31, 1998 amounted to $111,000. There was no advertising expense for any prior periods. Amounts earned by content providers including athletes, sports writers, and sports personalities in excess of the contractual royalty are included in sales and marketing expense. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Investments At December 31, 1998, short-term investments consist of debt instruments with maturity dates less than one year. The Company accounts for investments in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity Securities. The Company's short-term investments are classified as held-to-maturity as of the balance sheet date and are reported at amortized cost. Inventory Inventory consists primarily of licensed sports merchandise and collectibles and is stated at the lower of cost, determined on a first-in, first-out basis, or market. Property and Equipment Property, equipment and leasehold improvements are recorded at cost and depreciated using the straight-line method over its estimated useful life, ranging from three to seven years. Property and equipment consist primarily of computers, software, furniture, and equipment. Upon the sale or retirement of assets, the cost and accumulated depreciation are removed from the account and any gain or loss is recognized. Maintenance and repairs are charged to expense when incurred. Product Development Product development expenses consist of expenses incurred by the Company in the development and creation of its web sites. Product development expenses include compensation and related expenses, and costs incurred in developing features and functionality of the service. Product development costs are expensed as incurred. F-14

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 2. Significant Accounting Policies--(Continued) Income Taxes Prior to the acquisitions, the federal and state taxable income or loss of Athlete Direct LLC and Pro Sports Xchange LLC were recognized on the separate tax returns of the LLC members. Current and deferred taxes have not been provided on a pro forma basis because the effects are insignificant. The Company adopted SFAS No. 109 "Accounting for Income Taxes" on February 20, 1998. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Impairment of Long-Lived Assets and Intangibles In accordance with SFAS No. 121, "Accounting for the Impairment of Long- Lived Assets and Long-Lived Assets to Be Disposed Of," the Company periodically reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows (on an undiscounted basis) expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Loss Per Share Historical net loss per share is computed using the weighted average number of shares of common stock and common stock equivalents outstanding. Due to the anti-dilutive effects of common stock equivalents, historical basic and diluted loss per share are the same. Pro forma loss per share was computed to take effect for the redemption of the series A preferred stock and conversion of 29,166,663 shares of the series B convertible preferred stock into 29,166,663 shares of common stock as though these transactions occurred at the beginning of the periods presented. Stock Based Compensation The Company is subject to SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). As allowed by SFAS No. 123, the Company accounts for stock based compensation to employees in accordance with APB 25, "Accounting for Stock Issued to Employees." In cases where exercise prices are less than the fair value as of the grant date, compensation expense is F-15

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 2. Significant Accounting Policies--(Continued) recognized over the vesting period. The Company accounts for options issued to its vendors based upon the fair value of the services received or the fair value of options, whichever is more determinable. Unaudited pro forma financial information, assuming that the Company had adopted the measurement standards of SFAS No. 123, is included in Note 8. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and accounts receivable. Cash is deposited with high-credit, quality financial institutions and may exceed F.D.I.C. insured limits. The Company's accounts receivable are generally unsecured and are derived from revenue earned from customers located in the U.S. and are denominated in U.S. dollars. America Online, Inc. (AOL) accounted for approximately 42%, 47%, 49% and 46% of revenue for the period February 1, 1996 through December 31, 1996, the year ended December 31, 1997, the two months ended February 27, 1998, and the ten months ended December 31, 1998, respectively. AOL accounted for approximately 75% and 59% of accounts receivable at December 31, 1997 and 1998, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Segments and Related Information The Company views its operations as principally one segment and the financial information disclosed herein materially represents all of the financial information related to the Company's principal operating segment. F-16

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 3. Fixed Assets Fixed assets consist of the following: <TABLE> <CAPTION> December 31, December 31, September 30, 1997 1998 1999 ------------ ------------ ------------- (unaudited) <S> <C> <C> <C> Computers and equipment............ $ 65,511 $138,353 $1,683,456 Software and computer applications...................... 2,900 96,036 430,352 Furniture and fixtures............. 1,196 8,956 10,255 -------- -------- ---------- 69,607 243,345 2,124,063 Less accumulated depreciation and amortization...................... (17,975) (43,246) (311,736) -------- -------- ---------- $ 51,632 $200,099 $1,812,327 ======== ======== ========== </TABLE> During the ten months ended December 31, 1998, the Company wrote off fully amortized fixed assets with a gross value of $21,653. 4. Revolving Loan Due to Stockholder On February 27, 1998, the Company entered into a Revolving Loan Agreement ("Revolving Loan") with a stockholder whereby the stockholder made available to the Company $4,500,000. All amounts borrowed under the Revolving Loan are secured by, among other things, accounts and notes receivable, inventory, equipment, licensing agreements, and intellectual property of the Company. Amounts borrowed under the Revolving Loan bear interest at the prime rate plus 1% (8.75% at December 31, 1998) and are payable monthly on the last day of the month. All amounts borrowed under the Revolving Loan mature and are payable the earlier of February 27, 2003 or upon the occurrence of other reorganization transactions including an initial public offering which results in net proceeds to the Company of at least $10 million. The Revolving Loan contains covenants and other restrictions with which the Company must comply, including, among others, restrictions on additional indebtedness and payment of dividends. The Company was in compliance with these covenants at December 31, 1998. As of December 31, 1998, the Company had $2,501,915 available to be drawn under the revolving loan agreement. 5. Manditorily Redeemable Series A Preferred Stock On February 27, 1998, the Company entered into a Series A Preferred Stock Purchase Agreement with a shareholder whereby the Company agreed to sell and issue to the shareholder 2,000,000 shares of the Company's Manditorily Redeemable Series A Preferred Stock (Series A) at a purchase price of $1.00 per share. The Series A has no voting rights except on items that directly may adversely impact the Series A stockholders. Dividends accumulate at $.09 per share per year from the date of issuance and are payable upon the occurrence of a liquidation event, as defined. The Series A has a liquidation preference of $1.00 per share, plus all declared, or undeclared but accumulated and unpaid dividends on such shares. The Series A shall be redeemed for $1.00 per share plus all declared, or undeclared F-17

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 5. Manditorily Redeemable Series A Preferred Stock--(Continued) but accumulated and unpaid dividends, upon the occurrence of either i) a sale of 50% interest of the Company, or ii) an initial public offering of net proceeds of at least $10 million. The Company increased the carrying value of the Series A by $150,000 and $135,000 for the ten months ended December 31, 1998 and the nine months ended September 30, 1999, respectively, to account for the accretion of undeclared but accumulated and unpaid dividends. 6. Stockholders' Equity On February 27, 1998, the Board of Directors approved the employment agreements of two employees which included the issuance of 17,037,500 shares of common stock on April 1, 1998 at a purchase price of $8,519. The fair value of the shares issued in exchange for services provided to the Company was recorded as compensation expense. On December 4, 1998, the Company's Articles of Incorporation were amended increasing the amount of shares the Company is authorized to issue to 235,294,118 shares reflecting a 20-for-1 common stock split approved by the Board of Directors. Par value remained unchanged at $0.001 per share (see Note 11). The common stock split has been retroactively reflected in all share and per share disclosures in the accompanying consolidated financial statements. 7. Income Taxes The Predecessor Company was formed as a limited liability company and was treated as a partnership for income tax purposes. As such, the individual LLC members recorded on their individual tax returns their allocated portion of federal and state taxable income and expenses and accordingly the Predecessor Companies were not subject to federal and state income taxation. The Company did not provide an income tax benefit for any of the periods presented because it has experienced operating losses since inception. As a result of the net operating losses, the provision for income taxes consists solely of minimum state taxes which has been included in general and administrative expense. The following is a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate. <TABLE> <CAPTION> Ten months ended December 31, 1998 ------------ <S> <C> Statutory federal income tax benefit............................ (34)% State income tax benefit........................................ (2) Valuation allowance............................................. 17 Non-deductible stock compensation............................... 16 Non-deductible goodwill amortization............................ 3 ------ -- % ====== </TABLE> F-18

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 7. Income Taxes--(Continued) The components of deferred tax assets and related valuation allowance are as follows: <TABLE> <CAPTION> December 31, 1998 ------------ <S> <C> Deferred tax assets: Net operating loss carryforwards.............................. $ 648,000 Stock compensation............................................ 363,000 Other......................................................... 120,000 ---------- 1,131,000 Less valuation allowance...................................... (1,131,000) ---------- Net deferred tax assets......................................... $ -- ========== </TABLE> Due to the uncertainty surrounding the timing of realizing the net deferred tax assets in future tax returns, the Company has placed a valuation allowance equal to its net deferred tax assets. At December 31, 1998, the Company has net operating losses for both federal and state income tax purposes of approximately $1,631,000, which are available to offset future taxable income, if any, through 2019 and 2005, respectively. 8. Equity Incentive Plan On December 4, 1998, the Board of Directors and stockholders of the Company adopted the 1998 Equity Incentive Plan (Incentive Plan). The Incentive Plan provides for the granting, at the discretion of an administrator as appointed by the Board of Directors, of up to 15% of the number of shares of the Company's common stock authorized for issuance. Each grant of options under the Incentive Plan vest on a case-by-case basis as approved by the administrator, generally over a range of two to eight years from the date of grant and expire not more than 10 years from the date of grant. Deferred compensation for employees and deferred incentives for non- employees represent the fair value of options that were granted on December 4, 1998. Such amounts were recorded as deferred compensation in stockholders' equity for employees and deferred incentives for non-employees. The Company calculated the fair value of each option to non-employees on the date of grant using an option pricing model as prescribed by SFAS No. 123. The fair value of options granted to non-employees is evenly amortized from the beginning of the service period. F-19

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 8. Equity Incentive Plan--(Continued) Amounts recorded for options granted to employees represent the difference between the grant price and the deemed fair value of the Company's common stock based on a recent common stock equity transaction. The following table outlines total deferred compensation for employees and deferred incentives for non-employees for all periods presented: <TABLE> <CAPTION> Predecessor Companies -------------------------------------- Period from February 1, Two months Ten months Nine months 1996 to Year ended ended ended ended December 31, December 31, February 27, December 31, September 30, 1996 1997 1998 1998 1999 ------------ ------------ ------------ ------------ ------------- <S> <C> <C> <C> <C> <C> Employees............... $ -- $ 504,700 $ 61,800 $3,364,795 $2,274,532 Non-employees........... 907,083 1,051,034 51,833 52,833 267,940 -------- ---------- -------- ---------- ---------- Total................. $907,083 $1,555,734 $113,633 $3,417,628 $2,542,472 ======== ========== ======== ========== ========== </TABLE> A summary of changes in outstanding options under the Incentive Plan is as follows: <TABLE> <CAPTION> Employees Non-employees Total ------------------ ----------------------- ------------------------ Exercise Exercise Exercise Shares Price Shares Price Shares Price --------- -------- --------- ------------- ---------- ------------- <S> <C> <C> <C> <C> <C> <C> Outstanding at February 28, 1998............... -- $ -- -- $ -- -- $ -- Granted................. 7,912,353 0.015 4,262,500 0.015--0.350 12,174,853 0.015--0.350 Exercised............... -- -- -- -- -- -- Cancelled............... 240,000 0.015 -- -- 240,000 0.015 --------- ------- --------- ------------- ---------- ------------- Outstanding at December 31, 1998............... 7,672,353 $ 0.015 4,262,500 $0.015--0.350 11,934,853 $0.015--0.350 ========= ======= ========= ============= ========== ============= Options exercisable..... 4,009,706 1,176,750 5,186,456 ========= ========= ========== Available for grant..... 23,359,265 ========== </TABLE> The weighted average fair value of options granted during 1998 was $0.53. F-20

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 8. Equity Incentive Plan--(Continued) The weighted average exercise prices for options granted and exercisable at December 31, 1998 and the weighted average remaining contractual life for options outstanding at December 31, 1998, are as follows: <TABLE> <CAPTION> Options Outstanding Options Exercisable ------------------------------- --------------------- Weighted Average Weighted Weighted Range of Number Remaining Average Number Average Exercise of Contractual Exercise of Exercise Price Shares Life (Years) Price Shares Price -------- --------- ------------ -------- ---------- ---------- <S> <C> <C> <C> <C> <C> Employees $0.015.................. 7,672,353 9.3 $ 0.015 4,009,706 $ 0.015 Non-employees $0.015-0.016............ 3,795,000 8.2 $0.0153 1,156,750 $ 0.0153 0.120................... 100,000 8.2 0.120 20,000 0.120 0.350................... 237,500 9.6 0.350 -- -- (1)................... 130,000 9.4 (1) -- -- </TABLE> --------------------- (1) Exercise price is equal to the price of the proposed offering. SFAS No. 123 requires disclosure of pro forma net loss and pro forma basic and diluted loss per share based upon the fair value of the options issued. The Company calculated the fair value of each option grant on the date of the grant using an option pricing model as prescribed by SFAS No. 123 using the following assumptions: <TABLE> <S> <C> Risk-free interest rate................. 5.5% Expected life (in years)................ 5 Dividend yield.......................... 0% Volatility.............................. 65% </TABLE> This option valuation model requires the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing model does not necessarily provide a reliable single measure of the fair value of its employee stock options. F-21

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 8. Equity Incentive Plan--(Continued) For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows: <TABLE> <CAPTION> Predecessor Companies -------------------------------------- Period from February 1, Two months Ten months Seven months Nine months 1996 to Year ended ended ended ended ended December 31, December 31, February 27, December 31, September 30, September 30, 1996 1997 1998 1998 1998 1999 ------------ ------------ ------------ ------------ ------------- ------------- (unaudited) <S> <C> <C> <C> <C> <C> <C> Pro forma net loss...... 358,779 701,207 157,029 4,372,254 2,956,559 10,006,275 Pro forma basic and diluted loss per share.................. 0.02 0.01 0.05 </TABLE> These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. 9. Commitments and Contingencies The Company and the Predecessor Companies lease office facilities and certain computer and communications equipment under non-cancellable leases that expire at various dates through March 31, 2002. Rent expense amounted to approximately $5,000, $9,170, $8,431, and $155,163 for the period February 1, 1996 through December 31, 1996, the year ended December 31, 1997, the two months ended February 27, 1998 (the Predecessor Companies) and the ten months ended December 31, 1998 (the Company), respectively. Future minimum lease payments at December 31, 1998 are as follows: <TABLE> <CAPTION> Operating Leases --------- <S> <C> Year ended December 31: 1999............................. $ 217,520 2000............................. 205,020 2001............................. 205,020 2002............................. 51,255 --------- Total.......................... $ 678,815 ========= </TABLE> The Company and the Predecessor Companies have entered into various licensing, royalty, distribution, and consulting agreements with various online sites, vendors and other non-employees. The remaining terms of these agreements provide for the payment of royalties, bounties, and certain guaranteed amounts on a per member and/or minimum dollar amount basis. Additionally, some agreements provide for a specified percentage of advertising and merchandising revenue to be paid to F-22

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 9. Commitments and Contingencies--(Continued) non-employees from whose online site the revenue is derived. Minimum guaranteed payments required under such agreements at December 31, 1998 are as follows: <TABLE> <S> <C> Year ended December 31: 1999............................ $ 256,260 2000............................ 330,012 2001............................ 302,505 2002............................ 316,674 2003............................ 130,016 Thereafter...................... 375,000 ---------- Total......................... $1,710,467 ========== </TABLE> From time to time, the Company may be involved in litigation relating to claims arising out of the normal course of business. The Company is not currently a party to any legal proceedings, of which, individually or in the aggregate, would have a material effect on the Company's financial position or results of operations. 10. Defined Contribution Plan Effective November 1, 1998, the Company adopted a 401(k) Plan covering all of the Company's employees who are at least 21 years old. Employees may elect to contribute up to 15% of their wages to the 401(k) Plan and are eligible to enroll on the first day of every quarter. The Company, at its discretion, may make contributions to the 401(k) Plan, which are allocated among the participants. No contributions were made by the Company in 1998. 11. Subsequent Events (Unaudited) In January 1999, the Company entered into an interactive services agreement with AOL. Under this agreement, the Company receives a license fee for its programming and syndicated content. In accordance with the agreement, the Company operates a separately branded Athlete Direct area within both the AOL Sports Channel and the AOL Kids Channel as well as providing content and programming for team related areas within AOL Sports. AOL receives a percentage of revenues derived from the sale of merchandise and premium subscription products through the Company's sites on AOL. The agreement expires June 30, 2001 and AOL has the option to extend the agreement for up to two additional one-year terms. On February 26, 1999, the Company purchased certain assets and liabilities of Manna Mir Research, Inc. (Manna Mir) for $225,000 in cash and contingent consideration of up to an additional $205,000. Manna Mir operates a fantasy sports-related web site under the name RotoNews. F-23

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 11. Subsequent Events (Unaudited)--(Continued) In May 1999, the Company amended its Certificate of Incorporation to, among other matters, increase the authorized number of shares of common and preferred stock to 300,000,000 and 50,000,000, respectively. Preferred stock consists of 2,000,000 shares of series A preferred stock, $0.001 par value and 34,000,000 shares of convertible series B preferred stock (Series B), $0.001 par value. The Company issued convertible series B preferred stock which resulted in net proceeds of approximately $16,500,000, representing 29,166,663 shares issued and outstanding at $0.60 per share. The holders of shares of Series B are entitled to receive dividends at the rate of $0.054 per share per year if declared by the Board of Directors. Such dividends are not cumulative. Each share of Series B is convertible into fully paid and nonassessable shares of common stock as determined by dividing $0.60 by the Series B conversion price, as defined. In the event of a public offering of the Company's common stock that exceeds $15,000,000 all outstanding shares of series B preferred stock will automatically be converted into common stock. In May 1999, the Company entered into an agreement with Yahoo! to provide content and programming to Yahoo! in exchange for a monthly license fee and guaranteed promotion and placement within Yahoo! Sports. Yahoo! receives a percentage of electronic commerce sold on the Yahoo! site. This agreement expires in June 2000 with both parties having options to extend the agreement for one year under similar terms. In July 1999, the Company entered into various operating lease agreements for equipment and facilities ranging in terms from three to seven years. Under these leases, the Company is committed to pay approximately $990,000 per year. On August 9, 1999, the Company entered into a Reimbursement Agreement with a lender whereby the lender agreed to provide a letter of credit in the amount of $1,414,581. The average undrawn face amount of the letter of credit bears a commitment fee of 1.5%. In connection with the Reimbursement Agreement, the Company issued the lender a warrant to purchase 282,916 shares of the Company's common stock at a purchase price of $0.60 per share, subject to adjustment as provided in the Warrant Agreement. The fair value of the warrants of $144,287 was calculated using an option pricing model as prescribed by SFAS No. 123. F-24

Broadband Sports, Inc. and The Predecessor Companies Notes to Consolidated and Combined Financial Statements--(Continued) (Information at September 30, 1999 and for the seven months ended September 30, 1998 and the nine months ended September 30, 1999 is unaudited) 11. Subsequent Events (Unaudited)--(Continued) In October, 1999, the Company entered into an equipment master lease agreement with a capacity to borrow up to $2.8 million. The term of the agreement is for three years with an interest rate of 7.5%. As part of this agreement, the lessor will receive a warrant to purchase 221,666 shares of the Company's common stock at $0.80 per share. The maximum term of the warrant is ten years. In November, 1999, the Company entered into an employment agreement with its Chairman and Chief Executive Officer with a base salary of $180,000 per year. The employment agreement has no specific term and may be terminated by either party with or without cause. In connection with the employment agreement, the Company has issued 30,389,809 shares of common stock at $0.60 per share. The purchase price for the shares was paid in cash and through issuance of a secured recourse promissory note (Promissory Note) by the Company in the amount of $15,200,906. The Promissory Note bears interest at a rate of 6.02% per year. Principal and interest payments are due in full no later than on the ten year anniversary of the Promissory Note. Of the 30,389,809 shares issued, 7,588,444 shares are immediately vested and the remaining 22,801,365 shares will vest in equal monthly installments over the next four years, allowing for certain exceptions. In November, 1999, the Company further amended its Certificate of Incorporation to increase the authorized number of shares of common and preferred stock to 306,000,000 and 56,000,000, respectively, and create series C preferred stock (Series C), $0.001 par value, consisting of 20,000,000 authorized shares. The holders of shares of Series C are entitled to receive dividends at the rate of $0.072 per share per year if declared by the Board of Directors. Such dividends are not cumulative. The Company issued Series C which resulted in net proceeds of $14,800,000, representing 18,500,000 shares issued and outstanding at $0.80 per share. Each share of Series C is convertible to fully paid and nonassessable shares of common stock as determined by dividing $0.80 by the Series C conversion price, as defined. In the event of a public offering of the Company's common stock which results in net proceeds to the Company of at least $15,000,000, all outstanding shares of Series C will automatically be converted into common stock. Upon the occurrence of a liquidation event, as defined, any remaining assets of the Company, after payment in full of the liquidation preference of the mandatorily redeemable series A preferred stock, will be distributed pro rata to holders of the series B preferred stock, series C preferred stock and common stock based on the number of shares of common stock held by each (assuming full conversion of the Series B and the Series C). The effect of the conversion of the Series C has not been included in the pro forma balance sheet at September 30, 1999 since they were not outstanding at that date. F-25

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PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of Issuance and Distribution The following is an itemized list of the estimated expenses to be incurred in connection with the offering of the securities hereunder other than underwriting discounts and commissions. <TABLE> <CAPTION> Amount to be Paid ------- <S> <C> Registration fee.................................................... $12,788 NASD filing fee..................................................... 5,100 Nasdaq National Market listing fee.................................. 90,000 Printing and Engraving expenses..................................... Legal fees and expenses............................................. Blue Sky qualification fees and expenses............................ 5,000 Accounting fees and expenses........................................ Directors' and Officers' securities act liability insurance......... Transfer Agent and registrar fees................................... Miscellaneous....................................................... Total........................................................... $ </TABLE> Item 14. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law (the "DGCL") contains detailed provisions on indemnification of directors and officers against expenses, judgments, fines and amounts paid in settlement, actually and reasonably incurred in connection with legal proceedings. Section 102(a)(7) of the DGCL permits a provision in the certificate of incorporation of each corporation organized thereunder, such as Broadband Sports, eliminating or limiting, with certain exceptions, the personal liability of a director of the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The Certificate of Incorporation of Broadband Sports eliminates the liability of each of its directors to its stockholders or Broadband Sports for monetary damages for breach of fiduciary duty to the full extent provided by the DGCL, as such law exists or may hereafter be amended. Indemnification applies to any threatened, pending or completed action, suit or proceeding, whether, civil, criminal, administrative or investigative. Indemnification may include all expenses (including attorneys' fees, judgments, fines, ERISA excise taxes and amounts paid in settlement) reasonably incurred by the indemnified person. Reference is made to the following documents filed as exhibits to this Registration Statement regarding relevant indemnification provisions described above and elsewhere herein: <TABLE> <CAPTION> Exhibit Document Number -------- ------- <S> <C> Form of Underwriting Agreement...................................... 1.1 Amended and Restated Certificate of Incorporation................... 3.1 Form of Second Amended and Restated Certificate of Incorporation.... 3.2 Amended and Restated Bylaws......................................... 3.3 Form of Indemnification Agreements.................................. 10.9 </TABLE> II-1

Item 15. Recent Sales of Unregistered Securities From November 15, 1996 through November 15, 1999 the Registrant issued and sold the following securities: (a) In February 1998, we issued and sold an aggregate of 200,000,000 shares of common stock to the founders at an aggregate purchase price of $100,000. (b) In February 1998, we issued and sold 2,000,000 shares of Series A Preferred Stock to NMSS for a purchase price of $2,000,000. (c) In April 1998, we issued and sold an aggregate of 17,037,500 shares of common stock to Tyler J. Goldman and Ross Schaufelberger for an aggregate value of $8,518.75. (d) In May 1999, we sold an aggregate of 29,166,663 shares of Series B Preferred Stock for $0.60 per share, for an aggregate purchase price of approximately $17.5 million. (e) In August 1999, we issued warrants to purchase up to 282,916 shares of common stock at a purchase price of $0.60 per share. (f) In October 1999, we issued warrants to purchase up to 221,666 shares of common stock at a purchase price of $0.80 per share. (g) In November 1999, we issued and sold an aggregate of 30,389,809 shares of common stock to Richard D. Nanula at $0.60 per share, for an aggregate purchase price of approximately $18,233,885. (h) In November 1999, we sold an aggregate of 18,500,000 shares of Series C Preferred Stock for $0.80 per share, for an aggregate purchase price of $14.8 million. From November 15, 1996 through November 15, 1999, we issued options to purchase an aggregate of 30,592,656 shares of our common stock at exercise prices ranging from $0.015 to the initial offering price to the public. The issuances described above were deemed exempt from registration under the Securities Act in reliance upon Sections 4(2) or 3(a) of the Securities Act. The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in such transactions. All recipients had adequate access, through their relationships with the Company, to information about the Company. Item 16. Exhibits and Financial Statements (a) Exhibits and Financial Statement Schedules <TABLE> <CAPTION> Exhibit Number Description ------- ----------- <C> <S> 1.1 Form of Underwriting Agreement 3.1 Amended and Restated Certificate of Incorporation 3.2* Form of Second Amended and Restated Certificate of Incorporation 3.3* Amended and Restated Bylaws 4.1* Specimen Stock Certificate 5.1* Form of Opinion of Morrison & Foerster LLP 10.1 1998 Equity Incentive Plan </TABLE> II-2

<TABLE> <CAPTION> Exhibit Number Description ------- ----------- <C> <S> 10.2* Form of 1999 Equity Incentive Plan 10.3 Investors' Rights Agreement 10.4* Form of Warrant to Comdisco 10.5* Restricted Stock Purchase Agreement between the Registrant and R. Nanula 10.6* Employment Agreement for R. Nanula 10.7 Employment Agreement for T. Goldman 10.8 Revolving Loan Agreement, dated February 27, 1998 between the Registrant, Athlete Direct, Inc., Pro Sports Xchange and NMSS Partners, LLC 10.9 Form of Indemnification Agreement 10.10 Standard Office Lease, dated January 10, 1996 as amended between LAOP IV, LLC, and Smartalk Teleservices, Inc. 10.11 Sublease, dated April 1, 1998 between Smartalk Teleservices, Inc. and The RHL Group, Inc. 10.12 Sub-Sublease Agreement, dated April 1, 1998 between The RHL Group, Inc. and Registrant 10.13+ Lease, dated July 30, 1999, between Spieker Properties, L.P. and Registrant 10.14+ Interactive Services Agreement, dated January 1, 1999 between Registrant (and its wholly-owned subsidiaries, Pro Sports Xchange, Inc., and Athlete Direct, Inc.) and America Online, Inc. 21.1 Subsidiaries of Registrant 23.1 Consent of Ernst & Young LLP 23.2* Consent of Morrison & Foerster LLP 24.1 Power of Attorney (See II-5) 27.1 Financial Data Schedule </TABLE> --------------------- * To be filed by amendment. + Portions have been omitted pursuant to a confidential treatment request. (b) Financial Statement Schedules No schedules are included because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. Item 17. Undertakings The undersigned registrant hereby undertakes: (a) That, insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described under Item 14 above, or otherwise, the registrants has advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling II-3

precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (b) That, for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (c) That, for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d) To provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denomination and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. II-4

SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Los Angeles, County of Los Angeles, State of California, on November 24, 1999. BROADBAND SPORTS, INC. By: /s/ Richard Nanula _____________________________________ Richard Nanula Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY The undersigned hereby constitutes and appoints Richard Nanula and Gregory S. Hebner, and each of them, as his true and lawful attorneys-in-fact and agents, jointly and severally, with full power of substitution and resubstitution, for and in his stead, in any and all capacities, to sign on his behalf this Registration Statement on Form S-1 in connection with the offering of common stock by Broadband Sports, Inc. and to execute any amendments thereto (including post-effective amendments), including a registration statement filed pursuant to Rule 462(b), or certificates that may be required in connection with this Registration Statement, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission and granting unto said attorneys-in-fact and agents, and each of them, jointly and severally, the full power and authority to do and perform each and every act and thing necessary or advisable to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, jointly or severally, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. <TABLE> <CAPTION> Signature Title Date --------- ----- ---- <S> <C> <C> /s/ Richard Nanula Chairman of the Board and November 24, 1999 ____________________________________ Chief Executive Officer Richard Nanula (Principal Executive Officer) /s/ Gregory S. Hebner Chief Financial Officer November 24, 1999 ____________________________________ (Principal Financial and Gregory S. Hebner Accounting Officer) /s/ Tyler J. Goldman President, Broadband Studios November 24, 1999 ____________________________________ and Director Tyler J. Goldman /s/ Ahmed O. Alfi Director November 24, 1999 ____________________________________ Ahmed O. Alfi </TABLE> II-5

<TABLE> <CAPTION> Signature Title Date --------- ----- ---- <S> <C> <C> /s/ W. Allen Beasley Director November 24, 1999 ____________________________________ W. Allen Beasley Director ____________________________________ Frank J. Biondi, Jr. /s/ Stephen D. Greenberg Director November 24, 1999 ____________________________________ Stephen D. Greenberg /s/ Douglas Leone Director November 24, 1999 ____________________________________ Douglas Leone /s/ Geoffrey Y. Yang Director November 24, 1999 ____________________________________ Geoffery Y. Yang </TABLE> II-6

EXHIBIT INDEX <TABLE> <CAPTION> Exhibit Number Description ------- ----------- <C> <S> 1.1 Form of Underwriting Agreement 3.1 Amended and Restated Certificate of Incorporation 3.2* Certificate of Amendment to Amended and Restated Certificate of Incorporation 3.3* Form of Second Amended and Restated Certificate of Incorporation 3.4* Amended and Restated Bylaws 4.1* Specimen Stock Certificate 5.1* Form of Opinion of Morrison & Foerster LLP 10.1 1998 Equity Incentive Plan 10.2* Form of 1999 Equity Incentive Plan 10.3 Investors' Rights Agreement 10.4* Form of Warrant to Comdisco 10.5* Restricted Stock Purchase Agreement between the Registrant and R. Nanula 10.6* Employment Agreement for R. Nanula 10.7* Employment Agreement for T. Goldman 10.8 Revolving Loan Agreement, dated February 27, 1998 between the Registrant, Athlete Direct, Inc., Pro Sports Xchange and NMSS Partners, LLC 10.9 Form of Indemnification Agreement 10.10 Standard Office Lease, dated January 10, 1996 as amended between LAOP IV, LLC, and Smartalk Teleservices, Inc. 10.11 Sublease, dated April 1, 1998 between Smartalk Teleservices, Inc. and The RHL Group, Inc. 10.12 Sub-Sublease Agreement, dated April 1, 1998 between The RHL Group, Inc. and Registrant 10.13+ Lease, dated July 30, 1999, between Spieker Properties, L.P. and Registrant 10.14+ Interactive Services Agreement, dated January 1, 1999 between Registrant (and its wholly-owned subsidiaries, Pro Sports Xchange, Inc., and Athlete Direct, Inc.) and America Online, Inc. 21.1 Subsidiaries of Registrant 23.1 Consent of Ernst & Young LLP 23.2* Consent of Morrison & Foerster LLP 24.1 Power of Attorney (See II-5) 27.1 Financial Data Schedule </TABLE> --------------------- * To be filed by amendment. + Portions have been omitted pursuant to a confidential treatment request.

EXHIBIT 1.1 _______________ Shares BROADBAND SPORTS, INC. COMMON STOCK, PAR VALUE $0.001 PER SHARE UNDERWRITING AGREEMENT __________, 1999

_____________, 1999 Morgan Stanley & Co. Incorporated Hambrecht & Quist LLC SG Cowen Securities Corporation c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Dear Sirs and Mesdames: Broadband Sports, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the "Underwriters") _______________ shares of its Common Stock, par value $0.001 per share (the "Firm Shares"). The Company also proposes to issue and sell to the several Underwriters not more than an additional ______________ shares of its Common Stock, par value $0.001 per share (the "Additional Shares") if and to the extent that you, as Managers of the offering, shall have determined to exercise, on behalf of the Underwriters, the right to purchase such shares of common stock granted to the Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares." The shares of Common Stock, par value $0.001 per share, of the Company to be outstanding after giving effect to the sales contemplated hereby are hereinafter referred to as the "Common Stock." The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, including a prospectus, relating to the Shares. The registration statement as amended at the time it becomes effective, including the information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter referred to as the "Registration Statement"; the prospectus in the form first used to confirm sales of Shares is hereinafter referred to as the "Prospectus." If the Company has filed an abbreviated registration statement to register additional shares of Common Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462 Registration Statement.

Morgan Stanley & Co. Incorporated ("Morgan Stanley") has agreed to reserve a portion of the Shares to be purchased by it under this Agreement for sale to the Company's directors, officers, employees and business associates and other parties related to the Company (collectively, "Participants") at the public offering price, as set forth in the Prospectus under the heading "Underwriters" (the "Directed Share Program"). The Shares to be sold by Morgan Stanley and its affiliates pursuant to the Directed Share Program are referred to hereinafter as the "Directed Shares." Any Directed Shares not orally confirmed for purchase by any Participants by the end of the business day on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus. 1. Representations and Warranties. The Company represents and warrants to and agrees with each of the Underwriters that: (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) The Registration Statement, when it became effective, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Registration Statement and the Prospectus comply and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iii) the Prospectus does not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this paragraph do not apply to statements or omissions in the Registration Statement or the Prospectus based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would

not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) Each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; all of the issued shares of capital stock of each subsidiary of the Company have been duly authorized and are validly issued, fully paid and non-assessable and are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims. (e) This Agreement has been duly authorized, executed and delivered by the Company. (f) The authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus. (g) The shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable. (h) The Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable, and the issuance of such Shares will not be subject to any preemptive or similar rights. (i) The execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law or the certificate of incorporation or by- laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares and the

clearance of such offering with the National Association of Securities Dealers, Inc. (j) There has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement). (k) There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. (l) Each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder. (m) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (i) the Company and its subsidiaries have not incurred any material liability or obligation, direct or contingent, nor entered into any material transaction not in the ordinary course of business; (ii) the Company has not purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock other than ordinary and customary dividends; and (iii) there has not been any material change in the capital stock, short-term debt or long-term debt of the Company and its subsidiaries, except in each case as described in the Prospectus. (n) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real

property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Prospectus. (o) The Company and its subsidiaries own or possess, or can acquire on reasonable terms, all material patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks and trade names currently employed by them in connection with the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, could reasonably be expected to result in a material adverse affect on the Company and its subsidiaries, taken as a whole. (p) No material labor dispute with the employees of the Company or any of its subsidiaries exists, except as described in the Prospectus, or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing, threatened or imminent labor disturbance by the employees of any of its principal suppliers, manufacturers or contractors that could have a material adverse effect on the Company and its subsidiaries, taken as a whole. (q) The Company and its subsidiaries are insured by the insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which they are engaged; neither the Company nor any of its subsidiaries has been refused any insurance coverage sought or applied for; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described in the Prospectus. (r) The Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, singly or in the aggregate, if the subject of an unfavorable decision,

ruling or finding, would have a material adverse effect on the Company and its subsidiaries, taken as a whole, except as described the Prospectus. (s) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (t) The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. (u) The Company and its subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditions of such permits, licenses or approvals would not, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (v) There are no costs or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties) which would, singly or in the aggregate, have a material adverse effect on the Company and its subsidiaries, taken as a whole. (w) There are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities

with the Shares registered pursuant to the Registration Statement except as such have been validly waived. (x) The Company has complied with all provisions of Section 517.075, Florida Statutes relating to doing business with the Government of Cuba or with any person or affiliate located in Cuba. (y) The Company has reviewed its operations and that of its subsidiaries to evaluate the extent to which the business or operations of the Company or any of its subsidiaries will be affected by the Year 2000 Problem (that is, any significant risk that computer hardware or software applications used by the Company and its subsidiaries will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000); as a result of such review, (i) the Company has no reason to believe, and does not believe, that (A) there are any issues related to the Company's preparedness to address the Year 2000 Problem that are of a character required to be described or referred to in the Registration Statement or Prospectus that have not been accurately described in the Registration Statement or Prospectus and (B) the Year 2000 Problem will have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole, or result in any material loss or interference with the business or operations of the Company and its subsidiaries, taken as a whole; and (ii) the Company reasonably believes, after reviewing the disclosure and surveys of third parties with which the Company or its subsidiaries have a material relationship, that such material third parties are addressing or will address the Year 2000 Problem in a timely manner, except to the extent that a failure to address the Year 2000 Problem by such third party would not have a material adverse effect on the condition, financial or otherwise, or on the earnings, business or operations of the Company and its subsidiaries, taken as a whole. (z) The Registration Statement, the Prospectus and any preliminary prospectus comply, and any amendments or supplements thereto will comply, with any applicable laws or regulations of foreign jurisdictions in which the Prospectus or any preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the Directed Share Program. (aa) No consent, approval, authorization or order of, license from, or qualification or registration with, any governmental body or agency, other than those obtained, is required in connection with the offering of the Directed Shares in any jurisdiction where the Directed Shares are being offered.

(bb) The Company has not offered, or caused Morgan Stanley or its affiliates to offer, Shares to any person pursuant to the Directed Share Program with the specific intent to unlawfully influence (i) a customer or supplier of the Company to alter the customer's or supplier's level or type of business with the Company, or (ii) a trade journalist or publication to write or publish favorable information about the Company or its products. (cc) The Nasdaq Stock Market, Inc. has approved the Common Stock for listing on the Nasdaq National Market, subject only to official notice of issuance. (dd) Ernst & Young LLP are independent public accountants with respect to the Company as required by the Securities Act. (ee) The financial statements included in the Registration Statement and the Prospectus (and any amendment or supplement thereto), together with related schedules and notes, present fairly the financial position, results of operations and changes in financial position of the Company on the basis stated therein at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; the supporting schedules, if any, included in the Registration Statement present fairly in accordance with generally accepted accounting principles the information required to be stated therein; and the other financial and statistical information and data set forth in the Registration Statement and the Prospectus (and any amendment or supplement thereto) are, in all material respects, accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Company. (ff) Except for the Shares and as otherwise agreed to in writing by the Company and Morgan Stanley or as disclosed in the Prospectus, all outstanding shares of Common Stock, and all securities convertible into or exercisable or exchangeable for Common Stock, are subject to valid and binding agreements (collectively, the "Lock-Up Agreements") that restrict the holders thereof from selling, making any short sale of, granting any option for the purchase of, or otherwise transferring or disposing of, any of such shares of Common Stock, or any such securities convertible into or exercisable or exchangeable for Common Stock, for a period of 180 days after the date of the Prospectus without the prior written consent of Morgan Stanley.

2. Agreements to Sell and Purchase. The Company hereby agrees to sell to the several Underwriters, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase from the Company the respective numbers of Firm Shares set forth in Schedule I hereto opposite its name at $______ a share (the "Purchase Price"). On the basis of the representations and warranties contained in this Agreement, and subject to its terms and conditions, the Company agrees to sell to the Underwriters the Additional Shares, and the Underwriters shall have a one-time right to purchase, severally and not jointly, up to _______________ Additional Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to exercise such option, you shall so notify the Company in writing not later than 30 days after the date of this Agreement, which notice shall specify the number of Additional Shares to be purchased by the Underwriters and the date on which such shares are to be purchased. Such date may be the same as the Closing Date (as defined below) but not earlier than the Closing Date nor later than ten business days after the date of such notice. Additional Shares may be purchased as provided in Section 4 hereof solely for the purpose of covering over-allotments made in connection with the offering of the Firm Shares. If any Additional Shares are to be purchased, each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares as you may determine) that bears the same proportion to the total number of Additional Shares to be purchased as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of Firm Shares. The Company hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period ending 180 days after the date of the Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof of which the Underwriters have been advised in writing, or (C) any options granted under any of the Company's stock option plans or any shares issued under the Company's 1999 Employee Stock Purchase Plan.

3. Terms of Public Offering. The Company is advised by you that the Underwriters propose to make a public offering of their respective portions of the Shares as soon after the Registration Statement and this Agreement have become effective as in your judgment is advisable. The Company is further advised by you that the Shares are to be offered to the public initially at $_____________ a share (the "Public Offering Price") and to certain dealers selected by you at a price that represents a concession not in excess of $______ a share under the Public Offering Price, and that any Underwriter may allow, and such dealers may reallow, a concession, not in excess of $_____ a share, to any Underwriter or to certain other dealers. 4. Payment and Delivery. Payment for the Firm Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on ____________, 1999, or at such other time on the same or such other date, not later than _________, 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "Closing Date". Payment for any Additional Shares shall be made to the Company in Federal or other funds immediately available in New York City against delivery of such Additional Shares for the respective accounts of the several Underwriters at 10:00 a.m., New York City time, on the date specified in the notice described in Section 2 or at such other time on the same or on such other date, in any event not later than _______, 1999, as shall be designated in writing by you. The time and date of such payment are hereinafter referred to as the "Option Closing Date". Certificates for the Firm Shares and Additional Shares shall be in definitive form and registered in such names and in such denominations as you shall request in writing not later than one full business day prior to the Closing Date or the Option Closing Date, as the case may be. The certificates evidencing the Firm Shares and Additional Shares shall be delivered to you on the Closing Date or the Option Closing Date, as the case may be, for the respective accounts of the several Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid, against payment of the Purchase Price therefor. 5. Conditions to the Underwriters' Obligations. The obligations of the Company to sell the Shares to the Underwriters and the several obligations of the Underwriters to purchase and pay for the Shares on the Closing Date are subject to the condition that the Registration Statement shall have become effective not later than [_____] (New York City time) on the date hereof. The several obligations of the Underwriters are subject to the following further conditions:

(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date: (i) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; and (ii) there shall not have occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement) that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (b) The Underwriters shall have received on the Closing Date a certificate, dated the Closing Date and signed by an executive officer of the Company, to the effect set forth in Section 5(a)(i) above and to the effect that the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date. The officer signing and delivering such certificate may rely upon the best of his or her knowledge as to proceedings threatened. (c) The Underwriters shall have received on the Closing Date an opinion of Morrison & Foerster LLP, outside counsel for the Company, dated the Closing Date, to the effect that: (i) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so

qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (ii) each subsidiary of the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof contained in the Prospectus; (iv) the shares of Common Stock outstanding prior to the issuance of the Shares have been duly authorized and are validly issued, fully paid and non-assessable; (v) all of the issued shares of capital stock of each subsidiary of the Company have been duly authorized and are validly issued, fully paid and non-assessable and, unless otherwise disclosed in the Prospectus and to such counsel's knowledge are owned directly by the Company, free and clear of all liens, encumbrances, equities or claims; (vi) the Shares have been duly authorized and, when issued and delivered in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable; the issuance of such Shares will not be subject to any statutory preemptive rights or, to such counsel's knowledge, any other similar rights except as set forth in the Prospectus; the Company has no statutory preemptive rights or, to such counsel's knowledge, any outstanding options to purchase, or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations; and all outstanding shares of capital stock and options and other rights to acquire capital stock were not issued in violation of any preemptive rights or, to such counsel's knowledge, rights of first refusal or other similar rights, unless otherwise disclosed in the Prospectus; (vii) this Agreement has been duly authorized, executed and delivered by the Company;

(viii) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement will not contravene any provision of applicable law (other than applicable state securities and blue sky laws, as to which such counsel need not express an opinion) or the certificate of incorporation or by-laws of the Company or, to such counsel's knowledge, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or to such counsel's knowledge, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Company of its obligations under this Agreement, except such as have been obtained under the Securities Act and such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Shares; (ix) the statements (A) in the Prospectus under the captions "Dividend Policy," "Business--Distribution Partners," "Business-- Proprietary Rights," "Management--Stock Plans," "Management-- Employment Agreements," "Certain Transactions," "Description of Capital Stock," "Shares Eligible for Future Sale" and "Underwriters" and (B) in the Registration Statement in Items 14 and 15, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (x) such counsel does not know of any legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required; (xi) the Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, will not be an "investment company" as such term is defined in the Investment Company Act of 1940, as amended;

(xii) such counsel (A) is of the opinion that the Registration Statement and Prospectus (except for financial statements and schedules and other financial and statistical data included therein as to which such counsel need not express any opinion) comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder, (B) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (C) has no reason to believe that (except for financial statements and schedules and other financial and statistical data as to which such counsel need not express any belief) the Prospectus contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (xiii) except as set forth in the Registration Statement and Prospectus, no holders of Common Stock or other Securities of the Company have registration rights with respect to Securities of the Company and, except as set forth in the Registration Statement and Prospectus, all holders of securities of the Company having rights known to such counsel to registration of such shares of Common Stock or other Securities, because of the filing of the Registration Statement by the Company have, with respect to the offering contemplated thereby, waived such rights or such rights have expired by reason of lapse of time following notification of the Company's intent to file the Registration Statement. (xiv) to such counsel's knowledge there is no legal or beneficial owner of any securities of the Company who has any rights, not effectively satisfied or waived, to require registration of any shares of capital stock of the Company in connection with the filing of the Registration Statement; (xv) such counsel's knowledge: (A) the Registration Statement has become effective under the Securities Act, no stop order proceedings with respect thereto have been instituted or are pending or threatened under the Securities Act and nothing has come to such counsel's attention to lead it to believe that such proceedings are contemplated; and (B) any

required filing of the Prospectus and any supplement thereto pursuant to Rule 424(b) under the Securities Act has been made in the manner and within the time period required by Rule 424(b); (xvi) the offer and sale of the ______ shares of Series C Preferred Stock for an aggregate purchase price of ________, in a placement that closed on October __, 1999, pursuant to the terms and conditions of that certain Stock Purchase Agreement dated as of _________ between the Company and the purchasers [listed on Schedule XX thereto] was exempt from the registration requirements of the Act; and (xvi) the Shares to be sold under this Agreement to the Underwriters are duly authorized for listing on the Nasdaq National Market. (d) The Underwriters shall have received on the Closing Date an opinion of Cooley Godward LLP, counsel for the Underwriters, dated the Closing Date, covering the matters referred to in Sections 5(c)(vi) (but only as to the first clause thereof), 5(c)(vii), 5(c)(ix) (but only as to the statements in the Prospectus under "Description of Capital Stock" and "Underwriters") and 5(c)(xiii) above. With respect to Section 5(c)(xiii) above, Morrison & Foerster LLP and Cooley Godward LLP may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and review and discussion of the contents thereof, but are without independent check or verification, except as specified. The opinion of Morrison & Foerster described in Section 5(c) above shall be rendered to the Underwriters at the request of the Company and shall so state therein. (e) The Underwriters shall have received, on each of the date hereof and the Closing Date, a letter dated the date hereof or the Closing Date, as the case may be, in form and substance satisfactory to the Underwriters, from Ernst & Young LLP, independent public accountants, containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectus; provided that the letter delivered on the Closing Date shall use a "cut-off date" not earlier than the date hereof. (f) The "lock-up" agreements, each substantially in the form of Exhibit A hereto, between you and the security holders, officers and directors of the

Company relating to sales and certain other dispositions of shares of Common Stock or certain other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date. The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to you on the Option Closing Date of such documents as you may reasonably request with respect to the good standing of the Company, the due authorization and issuance of the Additional Shares and other matters related to the issuance of the Additional Shares and an opinion or opinions of Morrison & Foerster LLP in form and substance reasonably satisfactory to Cooley Godward, counsel for the Underwriters. 6. Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants with each Underwriter as follows: (a) To furnish to you, without charge, four (4) signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the Registration Statement (without exhibits thereto) and to furnish to you in New York City, without charge, prior to 10:00 a.m. New York City time on the business day next succeeding the date of this Agreement and during the period mentioned in Section 6(c) below, as many copies of the Prospectus and any supplements and amendments thereto or to the Registration Statement as you may reasonably request. (b) Before amending or supplementing the Registration Statement or the Prospectus, to furnish to you a copy of each such proposed amendment or supplement and not to file any such proposed amendment or supplement to which you reasonably object, and to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus required to be filed pursuant to such Rule. (c) If, during such period after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters the Prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses you will furnish to the Company) to which Shares may have been sold by you on behalf of the Underwriters and to any

other dealers upon request, either amendments or supplements to the Prospectus so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus, as amended or supplemented, will comply with law. (d) To endeavor to qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request. (e) To make generally available to the Company's security holders and to you as soon as practicable an earning statement covering the twelve- month period ending ___________, 2000 that satisfies the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder. (f) Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, to pay or cause to be paid all expenses incident to the performance of its obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company's counsel and the Company's accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any preliminary prospectus, the Prospectus and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the cost of printing or producing any Blue Sky or Legal Investment memorandum in connection with the offer and sale of the Shares under state securities laws and all expenses in connection with the qualification of the Shares for offer and sale under state securities laws as provided in Section 6(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable fees and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the offering of the Shares by the National Association of Securities Dealers, Inc. (the "NASD"), (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Stock and all costs and expenses incident to listing the Shares on the Nasdaq National Market, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any "road show" undertaken in connection with the marketing of the offering of the Shares, including, without

limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of any aircraft chartered in connection with the road show, (ix) all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Share Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Share Program, (x) all expenses in connection with any offer and sale of the Shares outside of the United States, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection with offers and sales outside of the United States, and (xi) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section. It is understood, however, that except as provided in this Section, Section 7 entitled "Indemnity and Contribution", and the last paragraph of Section 10 below, the Underwriters will pay all of their costs and expenses, including fees and disbursements of their counsel, stock transfer taxes payable on resale of any of the Shares by them and any advertising expenses connected with any offers they may make. (g) To place stop transfer orders on any Directed Shares that have been sold to Participants subject to the three-month restriction on sale, transfer, assignment, pledge or hypothecation imposed by NASD Regulation, Inc. under its Interpretative Material 2110-1 on free-riding and withholding to the extent necessary to ensure compliance with the three- month restrictions. (h) To comply with all applicable securities and other applicable laws, rules and regulations in each jurisdiction in which the Directed Shares are offered in connection with the Directed Share Program. 7. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, any preliminary prospectus or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such

losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through you expressly for use therein; provided, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages or liabilities purchased Shares, or any person controlling such Underwriter, fi a copy of the Prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Underwriter to such person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Shares to such person, and if the Prospectus (as so amended or supplemented) would have cured the defect giving rise to such losses, claims, damages or liabilities, unless such failure is the result of noncompliance by the Company with Section 6(a) hereof. (b) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through you expressly for use in the Registration Statement, any preliminary prospectus, the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be

reimbursed as they are incurred. Such firm shall be designated in writing by Morgan Stanley, in the case of parties indemnified pursuant to Section 7(a), and by the Company, in the case of parties indemnified pursuant to Section 7(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) To the extent the indemnification provided for in Section 7(a) or 7(b) is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other hand from the offering of the Shares or (ii) if the allocation provided by clause 7(d)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 7(d)(i) above but also the relative fault of the Company on the one hand and of the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material

fact relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. (e) The Company and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 7(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any indemnified party at law or in equity. (f) The indemnity and contribution provisions contained in this Section 7 and the representations, warranties and other statements of the Company contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 8. Directed Share Program Indemnification. (a) The Company agrees to indemnify and hold harmless Morgan Stanley and its affiliates and each person, if any, who controls Morgan Stanley or its affiliates within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act ("Morgan Stanley Entities"), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Participants in connection with the Directed Share Program, or caused by any omission or alleged omission to state therein a material

fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Participant to pay for and accept delivery of Directed Shares that the Participant has agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Share Program other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of Morgan Stanley Entities. (b) In case any proceeding (including any governmental investigation) shall be instituted involving any Morgan Stanley Entity in respect of which indemnity may be sought pursuant to Section 8(a), the Morgan Stanley Entity seeking indemnity shall promptly notify the Company in writing and the Company, upon request of the Morgan Stanley Entity, shall retain counsel reasonably satisfactory to the Morgan Stanley Entity to represent the Morgan Stanley Entity and any other the Company may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Morgan Stanley Entity shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Morgan Stanley Entity unless (i) the Company shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the Company and the Morgan Stanley Entity and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Company shall not, in respect of the legal expenses of the Morgan Stanley Entities in connection with any proceeding or related proceedings the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Morgan Stanley Entities. Any such firm for the Morgan Stanley Entities shall be designated in writing by Morgan Stanley. The Company shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Company agrees to indemnify the Morgan Stanley Entities from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time a Morgan Stanley Entity shall have requested the Company to reimburse it for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the Company agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Company of the aforesaid request and (ii) the Company shall not have reimbursed the Morgan Stanley Entity in accordance with such request prior to the date of such settlement. The Company shall not, without the prior written consent of Morgan Stanley, effect any settlement of any pending or threatened proceeding in respect of which any Morgan Stanley Entity is or could have been a party and indemnity could have been sought hereunder by such Morgan Stanley Entity, unless such settlement includes an unconditional release of the Morgan Stanley Entities from all liability on claims that are the subject matter of such proceeding.

(c) To the extent the indemnification provided for in Section 8(a) is unavailable to a Morgan Stanley Entity or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then the Company, in lieu of indemnifying the Morgan Stanley Entity thereunder, shall contribute to the amount paid or payable by the Morgan Stanley Entity as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Morgan Stanley Entities on the other hand from the offering of the Directed Shares or (ii) if the allocation provided by clause 8(c)(i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(c)(i) above but also the relative fault of the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and of the Morgan Stanley Entities on the other hand in connection with the offering of the Directed Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Directed Shares (before deducting expenses) and the total underwriting discounts and commissions received by the Morgan Stanley Entities for the Directed Shares, bear to the aggregate Public Offering Price of the Shares. If the loss, claim, damage or liability is caused by an untrue or alleged untrue statement of a material fact, the relative fault of the Company on the one hand and the Morgan Stanley Entities on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement or the omission or alleged omission relates to information supplied by the Company or by the Morgan Stanley Entities and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (d) The Company and the Morgan Stanley Entities agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Morgan Stanley Entities were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 8(c). The amount paid or payable by the Morgan Stanley Entities as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by the Morgan Stanley Entities in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, no Morgan Stanley Entity shall be required to contribute any amount in excess of the amount by which the total price at which the Directed Shares distributed to the public were offered to the public exceeds the amount of any damages that such Morgan Stanley Entity has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Morgan Stanley Entity at law or in equity.

(e) The indemnity and contribution provisions contained in this Section 8 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Morgan Stanley Entity or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Directed Shares. 9. Termination. This Agreement shall be subject to termination by notice given by you to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and (b) in the case of any of the events specified in clauses 9(a)(i) through 9(a)(iv), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. 10. Effectiveness; Defaulting Underwriters. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. If, on the Closing Date or the Option Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase Shares that it has or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of the Shares to be purchased on such date, the other Underwriters shall be obligated severally in the proportions that the number of Firm Shares set forth opposite their respective names in Schedule I bears to the aggregate number of Firm Shares set forth opposite the names of all such non- defaulting Underwriters, or in such other proportions as you may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to this Agreement be increased pursuant to this Section 10 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Firm Shares to be purchased, and arrangements

satisfactory to you and the Company for the purchase of such Firm Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter or the Company. In any such case either you or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. If, on the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Additional Shares and the aggregate number of Additional Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Additional Shares to be purchased, the non-defaulting Underwriters shall have the option to (i) terminate their obligation hereunder to purchase Additional Shares or (ii) purchase not less than the number of Additional Shares that such non-defaulting Underwriters would have been obligated to purchase in the absence of such default. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and disbursements of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 11. Counterparts. This Agreement may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 12. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. 13. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement. Very truly yours, BROADBAND SPORTS, INC. By:____________________________

Name: Title: Accepted as of the date hereof Morgan Stanley & Co. Incorporated Hambrecht & Quist LLC SG Cowen Securities Corporation Acting severally on behalf of themselves and the several Underwriters named in Schedule I hereto. By: Morgan Stanley & Co. Incorporated By:__________________________ Name: Title:

SCHEDULE I Number of Firm Shares Underwriter To Be Purchased Morgan Stanley & Co. Incorporated Hambrecht & Quist LLC SG Cowen Securities Corporation [NAMES OF OTHER UNDERWRITERS] _______________ Total ........ ===============

Exhibit A [FORM OF LOCK-UP LETTER] _____________, 1999 Morgan Stanley & Co. Incorporated Hambrecht & Quist LLC SG Cowen Securities Corporation c/o Morgan Stanley & Co. Incorporated 1585 Broadway New York, NY 10036 Dear Sirs and Mesdames: The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan Stanley") proposes to enter into an Underwriting Agreement (the "Underwriting Agreement") with Broadband Sports, Inc., a Delaware corporation (the "Company"), providing for the public offering (the "Public Offering") by the several Underwriters, including Morgan Stanley (the "Underwriters"), of ___ shares (the "Shares") of the Common Stock, par value $0.001 per share of the Company (the "Common Stock"). To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus relating to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares to the Underwriters pursuant to the Underwriting Agreement or (b) transactions relating to shares of Common Stock or other securities acquired in open market transactions after the completion of the Public Offering. In addition, the undersigned agrees that, without the prior written consent of Morgan Stanley on behalf of the Underwriters, it will not, during the period commencing on the date hereof and ending 180 days after the date of the Prospectus, make any demand for or exercise any right with respect to, the registration of any shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock. Notwithstanding the foregoing (i) gifts and transfers by will or intestacy or (ii) transfers to (A) the undersigned's members, partners, affiliates or immediate family or (B) a trust, the beneficiaries of which are the undersigned and/or members of the undersigned's immediate family, shall not be prohibited by this agreement; provided, that (x) the donee or transferee agrees in writing to be bound by the foregoing in the same manner as it applies to the undersigned and (y) if the donor or transferor is a reporting person subject to Section 16(a) of the Securities Exchange Act

of 1934 (the "Exchange Act"), any gifts or transfers made in accordance with this paragraph shall not require such person to, and such person shall not voluntarily, file a report of such transaction on Form 4 under the Exchange Act. "Immediate family" shall mean spouse, lineal descendants, father, mother, brother or sister of the transferor and father, mother, brother or sister of the transferor's spouse. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters. This agreement shall automatically terminate on the earlier of (i) the date on which the Underwriting Agreement is terminated, in the event that the Underwriters do not purchase the Shares and the Underwriting Agreement is terminated pursuant to its terms or (ii) January 31, 2000, if the Underwriting Agreement has not become effective. Very truly yours, _________________________ (Name) _________________________ (Address)

EXHIBIT 3.1 BROADBAND SPORTS, INC. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION BROADBAND SPORTS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is Broadband Sports, Inc., the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on February 20, 1998 under the name of E-Sport, Inc. 2. Pursuant to Section 242 and 245 of the General Corporation Law of the State of Delaware, this Amended and Restated Certificate of Incorporation restates and amends the provisions of this corporation's Certificate of Incorporation. 3. The terms and provisions of this Amended and Restated Certificate of Incorporation have been duly approved by vote of the required number of shares of each outstanding class of stock of this corporation pursuant to Subsection 242 of the General Corporation Law of the State of Delaware. 4. The text of the Amended and Restated Certificate of Incorporation is hereby restated and amended to read in its entirety as set forth in Exhibit A attached hereto. --------- IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed this 29th day of September 1999. ---- BROADBAND SPORTS, INC. /s/ Tyler Goldman, President ---------------------------- Tyler Goldman, President ATTEST: /s/ Ross Schaufelberger ----------------------- Ross Schaufelberger, Secretary

EXHIBIT A --------- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BROADBAND SPORTS, INC., a Delaware Corporation I The name of this corporation is Broadband Sports, Inc. II The address of the registered office of the corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the corporation's registered agent at such address is The Corporation Trust Company. III The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. IV A. Classes of Stock. This corporation is authorized to issue two classes ---------------- of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the corporation is authorized to issue is three hundred fifty million (350,000,000) shares, three hundred million (300,000,000) shares of which shall be Common Stock (the "Common Stock") and fifty million (50,000,000) shares of which shall be Preferred Stock (the "Preferred Stock"). The Common Stock shall have a par value of $0.001 per share and the Preferred Stock shall have a par value of $0.001 per share. B. Rights, Preferences and Restrictions of Preferred Stock. The ------------------------------------------------------- Preferred Stock authorized by this Certificate of Incorporation may be issued from time to time in one or more series. The rights, preferences, privileges, and restrictions granted to and imposed on the Series A Preferred Stock, which series shall consist of two million (2,000,000) shares, the Series B Preferred Stock, which series shall consist of thirty four million (34,000,000) shares and the Series C Preferred Stock, which series shall consist of two million five hundred thousand (2,500,000) shares, are as set forth below in this Article IV(B). Subject to compliance with applicable protective voting rights which have been or may be granted to the Preferred Stock or series thereof in Certificates of Designation or this corporation's Certificate of Incorporation ("Protective Provisions"), the Board of Directors is hereby authorized to fix or alter the rights, 1

preferences, privileges and restrictions granted to or imposed upon additional series of Preferred Stock, and the number of shares constituting any such series and the designation thereof, or of any of them. Subject to compliance with applicable Protective Provisions, but notwithstanding any other rights of the Preferred Stock or any series thereof, the rights, privileges, preferences and restrictions of any such additional series may be subordinated to, pari passu ---------- with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote or written consent), or senior to any of those of any present or future class or series of Preferred Stock or Common Stock. Subject to compliance with applicable Protective Provisions, the Board of Directors is also authorized to increase or decrease the number of shares of any series, prior or subsequent to the issue of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series. 1. Dividend Provisions. ------------------- (a) The holders of the Series A Preferred Stock shall be entitled to receive dividends at the rate of $0.09 per share per annum (appropriately adjusted for any stock dividend, combination, stock split or other recapitalization (collectively a "Recapitalization") with respect to the Series A Preferred Stock). Such dividends shall begin to accumulate upon the date of issuance of the Series A Preferred Stock and shall be due and payable upon the occurrence of a Liquidation Event (as defined in Section 2 hereof) or a Redemption Event (as defined in Section 3 hereof). No dividends shall be paid on any Common Stock or any other Preferred Stock during any fiscal year of the corporation until dividends in the total amount of $0.09 per share (as adjusted for any Recapitalization with respect to the Series A Preferred Stock) on the Series A Preferred Stock shall have been accounted for and set aside during that fiscal year. In the event the corporation shall declare a distribution payable in securities of other persons, evidences of indebtedness issued by the corporation or other persons, assets (excluding cash dividends) or options or rights to purchase any such securities or evidences of indebtedness, then, in each such case the holders of the Series A Preferred Stock shall be entitled to a proportionate share of any such distribution as though the holders of the Series A Preferred Stock were the holders of the same number of shares of Common Stock of the corporation. (b) Subject to the rights of series of Preferred Stock which may from time to time come into existence, the holders of shares of Series B Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of this corporation) on the Common Stock and the Series C Preferred Stock of this corporation, at the rate of $0.054 per share (appropriately adjusted for any Recapitalization with respect to the Series B Preferred Stock) of Series B Preferred Stock per annum, when, as and if declared by the Board of Directors of the corporation. Such dividends shall not be cumulative. In the event that the corporation declares or pays any dividend on the Common Stock (whether payable in cash, securities, or other property), other 2

than dividends subject to subsection (d)(i) or (e) of Section 4, the corporation shall also declare and pay to the holders of the Series B Preferred Stock at the same time that it declares and pays such dividends to the holders of the Common Stock, the dividends which would have been declared and paid with respect to the Common Stock issuable upon the conversion of the Series B Preferred Stock had all of the Series B Preferred Stock been converted immediately prior to the record date for such dividend, or if no record date is fixed, the date as of which the record holders of Common Stock entitled to such dividends are determined. (c) Subject to the rights of series of Preferred Stock which may from time to time come into existence, the holders of shares of Series C Preferred Stock shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (payable other than in Common Stock or other securities and rights convertible into or entitling the holder thereof to receive, directly or indirectly, additional shares of Common Stock of this corporation) on the Common Stock of this corporation, at the rate of $0.072 per share (appropriately adjusted for any Recapitalization with respect to the Series C Preferred Stock) of Series C Preferred Stock per annum, when, as and if declared by the Board of Directors of the corporation. Such dividends shall not be cumulative. In the event that the corporation declares or pays any dividend on the Common Stock (whether payable in cash, securities, or other property), other than dividends subject to subsection (d)(i) or (e) of Section 4, the corporation shall also declare and pay to the holders of the Series C Preferred Stock at the same time that it declares and pays such dividends to the holders of the Common Stock, the dividends which would have been declared and paid with respect to the Common Stock issuable upon the conversion of the Series C Preferred Stock had all of the Series C Preferred Stock been converted immediately prior to the record date for such dividend, or if no record date is fixed, the date as of which the record holders of Common Stock entitled to such dividends are determined . 2. Liquidation Preference. ---------------------- (a) In the event of any liquidation, dissolution or winding up of this corporation (a "Liquidation Event"), either voluntary or involuntary, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the corporation to the holders of any other Preferred Stock or Common Stock by reason of their ownership thereof, the amount of $1.00 per share (as adjusted for any Recapitalization with respect to the Series A Preferred Stock), plus all declared, or undeclared but accumulated and unpaid, dividends on such share for each share of Series A preferred Stock then held by them (the "Series A Liquidation Preference Amount"). If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amount, then the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the preferential amount each such holder is otherwise entitled to receive. (b) In the event of any Liquidation Event, and subject to the payment in full of the aggregate Series A Liquidation Preference Amount as provided in subsection (a) of 3

this Section 2, and any other distribution that may be required with respect to series of Preferred Stock that may from time to time come into existence, the remaining assets of the corporation available for distribution to stockholders shall be distributed among the holders of Series B Preferred Stock, Series C Preferred Stock and Common Stock pro rata based on the number of shares of Common Stock held by each (assuming full conversion of all shares of Series B Preferred Stock and Series C Preferred Stock). (c) For purposes of this Section 2, a Liquidation Event shall be deemed to be occasioned by, or to include, (A) the acquisition of the corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the corporation); or (B) a sale of all or substantially all of the assets of the corporation; unless the corporation's stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the corporation's acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity. (d) Whenever the distribution provided for in this Section 2 shall be payable in securities or property other than cash, the value of such distribution shall be the fair market value of such securities or other property as determined in good faith by the Board of Directors of the corporation. 3. Redemption. ---------- (a) In the event that the corporation shall consummate (i) a sale of all or substantially all of the assets or stock of the corporation to any entity in which more than 50% of the equity interests in such entity are not held by the holders of Common Stock of the corporation (assuming full conversion of all shares of Series B Preferred Stock and Series C Preferred Stock) as in existence immediately prior to the consummation of such transaction, or (ii) an underwritten public offering of the Common Stock of the corporation pursuant to the Securities Act of 1933, as amended, which results in net proceeds to the corporation of at least $10 million (each such event referred to as a "Redemption Event" and the date of consummation of each such Redemption Event referred to as the "Redemption Date"), the corporation shall, concurrently with the surrender by the holders of Series A Preferred Stock of the certificates representing such shares, redeem all of the outstanding shares of Series A Preferred Stock by paying in cash therefor, $1.00 per share of Series A Preferred Stock (as adjusted for any Recapitalizations with respect to the Series A Preferred Stock) plus all declared, or undeclared but accumulated and unpaid, dividends on such shares (the "Redemption Price"). (b) Except as provided in subsection (c) of this Section 3, on or after the Redemption Date, each holder of Series A Preferred Stock to be redeemed shall surrender to the corporation the certificate or certificates representing such shares, in the manner and at the place designated by the corporation, and thereupon the Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. 4

(c) From and after the Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of shares of Series A Preferred Stock (except the right to receive the Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the corporation legally available for redemption of shares of Series A Preferred Stock on any Redemption Date are insufficient to redeem the total number of shares of Series A Preferred Stock to be redeemed on such date, those funds which are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed based upon their holdings of Series A Preferred Stock. The shares of Series A Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. Any time thereafter when additional funds of the corporation are legally available for the redemption of shares of Series A Preferred Stock, such funds will immediately be used to redeem the balance of the shares which the corporation has become obligated to redeem on any Redemption Date, but which it has not redeemed. 4. Conversion. The Series A Preferred Stock is not convertible. The ---------- holders of the Series B Preferred Stock and the Series C Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series B Preferred Stock and the ---------------- Series C Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, at the office of this corporation or any transfer agent for such Preferred Stock, into such number of fully paid and nonassessable shares of Common Stock as is determined in accordance with subsection (a) of this Section 4. The number of shares of Common Stock into which each share of Series B Preferred Stock shall be convertible shall be determined by dividing $0.60 (the "Original Series B Issue Price") by the Series B Conversion Price determined as hereinafter provided, in effect on the date that the certificate is surrendered for conversion. The number of shares of Common Stock into which each share of Series C Preferred Stock shall be convertible shall be determined by dividing $0.80 (the "Original Series C Issue Price") by the Series C Conversion Price determined as hereinafter provided, in effect on the date that the certificate is surrendered for conversion. The initial Series B Conversion Price per share and the initial Series C Conversion Price per share shall be the Original Series B Issue Price and the Original Series C Issue Price, respectively; provided, however, that the Series B Conversion Price and Series C Conversion Price shall be subject to adjustment as set forth in subsection (d) of this Section 4. (b) Automatic Conversion. Each share of Series B Preferred Stock and -------------------- Series C Preferred Stock shall automatically be converted into shares of Common Stock at the Series B Conversion Price and Series C Conversion Price, as the case may be, at the time in effect for such share immediately upon the earlier of (i) the corporation's sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended, which results in net proceeds to the corporation of at least $15,000,000 or (ii) the date specified by written consent or agreement of the holders of a 5

majority of the then outstanding shares of Series B Preferred Stock and Series C Preferred Stock voting together as a single class. (c) Mechanics of Conversion. Before any holder of Series B Preferred ----------------------- Stock or Series C Preferred Stock, as the case may be, shall be entitled to convert the same into shares of Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed, at the office of this corporation or of any transfer agent for the Preferred Stock, and shall give written notice to this corporation at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. This corporation shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date. If the conversion is in connection with an underwritten public offering of securities registered pursuant to the Securities Act of 1933, as amended, the conversion may, at the option of any holder tendering Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock issuable upon such conversion of the Preferred Stock shall not be deemed to have converted such Preferred Stock until immediately prior to the closing of such sale of securities . (d) Conversion Price Adjustments of Preferred Stock. The Series B ----------------------------------------------- Conversion Price and Series C Conversion Price shall be subject to adjustment from time to time as follows: (i) In the event the corporation should at any time or from time to time after the date upon which any shares of Series C Preferred Stock were first issued (the "Series C Purchase Date") fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as "Common Stock Equivalents") without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend, distribution, split or subdivision if no record date is fixed), the Series B Conversion Price or the Series C Conversion Price, as the case may be, shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of Series B Preferred Stock or Series C Preferred Stock shall be increased in proportion to such increase of the aggregate number of shares of Common Stock outstanding and those issuable with respect to such Common Stock Equivalents. 6

(ii) If the number of shares of Common Stock outstanding at any time after the Series C Purchase Date is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Series B Conversion Price or Series C Conversion Price, as the case may be, shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of share of Series B Preferred Stock or Series C Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. (e) Other Distributions. In the event this corporation shall declare ------------------- a distribution payable in securities of other persons, evidences of indebtedness issued by this corporation or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection 4(d)(i), then, in each such case for the purpose of this subsection 4(e), the holders of the Series B Preferred Stock or Series C Preferred Stock, as the case may be, shall be entitled to a proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the corporation into which their shares of Series B Preferred Stock or Series C Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock of the corporation entitled to receive such distribution. (f) Recapitalizations. If at any time or from time to time there ----------------- shall be a recapitalization of the Common Stock (other than a subdivision, combination or merger or sale of assets transaction provided for elsewhere in Section 2 or this Section 4) provision shall be made so that the holders of the Series B Preferred Stock and Series C Preferred Stock shall thereafter be entitled to receive upon conversion of the Series B Preferred Stock or Series C Preferred Stock the number of shares of stock or other securities or property of the corporation or otherwise, to which a holder of Common Stock deliverable upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4 with respect to the rights of the holders of the Series B Preferred Stock or Series C Preferred Stock after the recapitalization to the end that the provisions of this Section 4 (including adjustment of the Series B Conversion Price or Series C Conversion Price then in effect and the number of shares purchasable upon conversion of the Series B Preferred Stock or Series C Preferred Stock), shall be applicable after that event as nearly equivalent as may be practicable. (g) No Impairment. This corporation will not, by amendment of its ------------- Certificate of Incorporation or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by this corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of the Series B Preferred Stock or Series C Preferred Stock against impairment. 7

(h) No Fractional Shares and Certificate as to Adjustments. ------------------------------------------------------ (i) No fractional shares shall be issued upon conversion of any share or shares of the Series B Preferred Stock or Series C Preferred Stock and the number of shares of Common Stock to be issued shall be rounded to the nearest whole share. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Series B Preferred Stock or Series C Preferred Stock the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (ii) Upon the occurrence of each adjustment or readjustment of the Series B Conversion Price or Series C Conversion Price pursuant to this Section 4, this corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Series B Preferred Stock or Series C Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. This corporation shall, upon the written request at any time of any holder of Series B Preferred Stock or Series C Preferred Stock furnish or cause to be furnished to such holder a like certificate setting forth (A) such adjustment and readjustment, (B) the Series B Conversion Price or Series C Conversion Price at the time in effect and (C) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of a share of Series B Preferred Stock or Series C Preferred Stock. (i) Notices of Record Date. In the event of any taking by this ---------------------- corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, this corporation shall mail to each holder of Series B Preferred Stock or Series C Preferred Stock at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right. (j) Reservation of Stock Issuable Upon Conversion. The --------------------------------------------- corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of the Series B Preferred Stock or Series C Preferred Stock such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of the Series B Preferred Stock or Series C Preferred Stock and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Series B Preferred Stock and Series C Preferred Stock, in addition to such other remedies as shall be available to the holder of such Series B Preferred Stock and Series C Preferred Stock, this corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging 8

in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Certificate of Incorporation. (k) Notices. Any notice required by the provisions of this -------- Section 4 to be given to the holders of shares of Series B Preferred Stock or Series C Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder's address appearing on the books of this corporation. 5. Voting Rights. ------------- (a) General. Except as otherwise expressly provided herein, the ------- holder of each share of Series B Preferred Stock and Series C Preferred Stock shall have the right to one vote for each share of Common Stock into which such Series B Preferred Stock or Series C Preferred Stock could then be converted and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders' meeting in accordance with the Bylaws of this corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Series B Preferred Stock and Series C Preferred Stock held by each holder could be converted) shall be rounded to be nearest whole number (with one-half being rounded upward). (b) Series A Preferred Stock. The holders of Series A Preferred ------------------------ Stock will not have any voting rights except (i) that the holders of Series A Preferred Stock shall have such rights as from time to time are required by the Delaware General Corporation law and (ii) the holders of Series A Preferred Stock shall have one vote for each share of Series A Preferred Stock (or, if a share of Common Stock shall have more than one vote per share, that number of votes per share of a share of Common Stock) as to matters voted upon by the holders of the Common Stock in which such matter could have a direct, adverse affect on the rights of the holders of Series A Preferred Stock (which shall not be deemed to include the election of any director). 6. Protective Provisions. --------------------- (a) Series A Preferred Stock. Without limiting the generality of ------------------------ subsection (b) of Section 5, so long as shares of Series A Preferred Stock are outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least 66 2/3% of the then outstanding shares of Series A Preferred Stock, voting as a separate class, take any action to amend the Certificate of Incorporation or Bylaws of the corporation in a manner that would change any of the rights, preferences or privileges provided for herein for the benefit of any shares of the Series A Preferred Stock. Without limiting the generality of the preceding sentence, the corporation will not amend its Certificate of Incorporation or Bylaws without the approval of the holders of 66 2/3% of Series A Preferred Stock if such amendment would: 9

(1) reduce the dividend rates on the Series A Preferred Stock provided for herein or make such dividends non-cumulative or defer the date from which dividends will accrue, or cancel accrued and unpaid dividends, or change the relative seniority rights of the holders of that series of Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the corporation; (2) reduce the amount payable to the holders of the Series A Preferred Stock upon a Liquidation Event, or change the relative seniority of the liquidation preferences of the holders of the Series A Preferred Stock to the rights upon liquidation of the holders of any other capital stock of the corporation; (3) reduce the Redemption Price specified in Section 3 hereof with respect to the Series A Preferred Stock; (4) delay any of the Redemption Dates provided for in Section 3; or (5) change the authorized number of directors of the corporation. (b) Series B Preferred Stock. So long as shares of Series B Preferred ------------------------ Stock are outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock, voting as a separate class, take any action to: (1) alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect materially and adversely the shares; (2) increase or decrease (other than by conversion) the total number of authorized shares of Series B Preferred Stock; or (3) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security, having a preference over the Series B Preferred Stock as to the payment of dividends. (c) Series C Preferred Stock. So long as shares of Series C Preferred ------------------------ Stock are outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series C Preferred Stock, voting as a separate class, take any action to: (1) alter or change the rights, preferences or privileges of the shares of Series C Preferred Stock so as to affect materially and adversely the shares; (2) increase or decrease (other than by conversion) the total number of authorized shares of Series C Preferred Stock; or 10

(3) authorize or issue, or obligate itself to issue, any other equity security, including any other security convertible into or exercisable for any equity security, having a preference over the Series C Preferred Stock as to the payment of dividends. 7. Status of Converted or Redeemed Stock. In the event any shares of ------------------------------------- Series A Preferred Stock shall be redeemed pursuant to Section 3 or any shares of Series B Preferred Stock or Series C Preferred Stock, as the case may be, shall be converted pursuant to Section 4, the shares so redeemed or converted shall be canceled and shall not be issuable by the corporation. The Certificate of Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in the corporation's authorized capital stock. C. Common Stock. 1. Dividend Rights. Subject to the prior rights of holders of all --------------- classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation Rights. Upon the liquidation, dissolution or winding ------------------ up of the corporation, the assets of the corporation shall be distributed as provided in Section 2 of Division (B) of this Article IV hereof. 3. Redemption. The Common Stock is not redeemable. ---------- 4. Voting Rights. The holder of each share of Common Stock shall have ------------- the right to one vote, and shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. V The corporation is to have perpetual existence. VI Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the 11

stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as a consequence of such compromise or arrangement, the same compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. VII For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation, and regulation of the powers of the corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided: 1. The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws. The phrase "whole Board" and the phrase "total number of directors" shall be deemed to have the same meaning, to wit, the total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. 2. After the original or other Bylaws of the corporation have been adopted, amended, or repealed, as the case may be, in accordance with the provisions of Section 109 of the General Corporation Law of the State of Delaware, and, after the corporation has received any payment for any of its stock, the power to adopt, amend, or repeal the Bylaws of the corporation may be exercised by the Board of Directors of the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant to the provision of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial Bylaw or in a Bylaw adopted by the stockholders of the corporation entitled to vote unless provisions for such classification shall be set forth in this certificate of incorporation. 3. Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of the Certificate of Incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph (2) of subsection (b) of Section 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease in the number of authorized shares of said class. 12

VIII The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provision of paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented. IX The corporation shall, to the fullest extent permitted by the provisions of Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person. X From time to time any of the provisions of this Certificate of Incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are granted subject to the provisions of this Article X. XI Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the corporation. * * * 13

EXHIBIT 10.1 BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN ARTICLE I PURPOSE OF PLAN The Company has adopted this Plan to promote the interests of the Company and its stockholders by using investment interests in the Company to attract, retain and motivate its management and other persons, to encourage and reward their contributions to the performance of the Company, and to align their interests with the interests of the Company's stockholders. Capitalized terms not otherwise defined herein have the meanings ascribed to them in Article VIII. ------------ ARTICLE II EFFECTIVE DATE AND TERM OF PLAN 2.1 Term of Plan. This Plan became effective as of the Effective Date and will continue in effect until the Expiration Date, at which time this Plan will automatically terminate. 2.2 Effect on Awards. Awards may be granted only during the Plan Term, but each Award granted during the Plan Term will remain in effect after the Expiration Date until such Award has been exercised, terminated or expired in accordance with its terms and the terms of this Plan. 2.3 Stockholder Approval. This Plan must be approved by the Company's stockholders within 12 months before or after the Effective Date. The effectiveness of any Awards granted prior to such stockholder approval will be subject to such stockholder approval and rescinded if stockholder approval is not obtained. ARTICLE III SHARES SUBJECT TO PLAN 3.1 Number of Shares. The maximum number of shares of Common Stock that may be issued pursuant to Awards granted under this Plan is equal to 15% of the number of shares of Common Stock authorized pursuant to the Company's Certificate of Incorporation as of the Effective Date, subject to adjustment as set forth in Section 3.4. ----------- 3.2 Source of Shares. The Common Stock to be issued under this Plan will be made available, at the discretion of the Administrator, either from authorized but unissued shares of Common Stock or from previously issued shares of Common Stock reacquired by the Company. 3.3 Availability of Unused Shares. Shares of Common Stock subject to unexercised portions of any Award that expire, terminate or are canceled, and shares of Common Stock

issued pursuant to an Award that are reacquired by the Company pursuant to the terms of (a) the Award under which such shares were issued, or (b) any stockholder agreement entered into by a Recipient in connection with receipt or exercise of an Award, will again become available for the grant of further Awards under this Plan as part of the shares available under Section 3.1. In ----------- addition, shares of Common Stock subject to an Award that are delivered to or retained by the Company upon exercise to cover cashless exercise or tax withholding, and any shares of Common Stock underlying an Award that are not issued because the Award is settled in cash, will be available for grant of further Awards under this Plan as part of the shares available under Section ------- 3.1. --- 3.4 Adjustment Provisions. (a) Adjustments. If the Company consummates any Reorganization in ----------- which holders of shares of Common Stock are entitled to receive in respect of such shares any additional shares or new or different shares or securities, cash or other consideration (including, without limitation, a different number of shares of Common Stock), or if the outstanding shares of Common Stock are increased, decreased or exchanged for a different number or kind of shares or other securities through merger, consolidation, sale or exchange of assets of the Company, reorganization, recapitalization, reclassification, combination, stock dividend, stock split, reverse stock split, spin-off, or similar transaction, then an appropriate and proportionate adjustment shall be made by the Administrator in its discretion in: (1) the maximum number and kind of shares subject to this Plan as provided in Section 3.1; (2) the number and kind ----------- of shares or other securities subject to then outstanding Awards; and/or (3) the price for each share or other unit of any other securities subject to, or measurement criteria applicable to, then outstanding Awards. (b) No Fractional Interests. No fractional interests will be issued ----------------------- under the Plan resulting from any adjustments. (c) Adjustments Related to Company Stock. To the extent any ------------------------------------ adjustments relate to stock or securities of the Company, such adjustments will be made by the Administrator, whose determination in that respect will be final, binding and conclusive. (d) Right to Make Adjustment. The grant of an Award will not affect ------------------------ in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate or sell, or transfer all or any part of its business or assets. (e) Limitations. No adjustment to the terms of an Incentive Stock ----------- Option may be made unless such adjustment either: (i) would not cause the Option to lose its status as an Incentive Stock Option; or (ii) is agreed to in writing by the Administrator and the Recipient. 3.5 Reservation of Shares. The Company will at all times reserve and keep available shares of Common Stock equaling at least the total number of shares of Common Stock issuable pursuant to all outstanding Awards. 2

ARTICLE IV ADMINISTRATION OF PLAN 4.1 Administrator. (a) Plan Administration. This Plan will be administered by the Board ------------------- and may also be administered by a Committee of the Board appointed pursuant to Section 4.1(b). -------------- (b) Administration by Committee. The Board in its sole discretion may --------------------------- from time to time appoint a Committee of not less than two (2) Board members with authority to administer this Plan in whole or part and, subject to applicable law, to exercise any or all of the powers, authority and discretion of the Board under this Plan. The Board may from time to time increase or decrease (but not below two (2)) the number of members of the Committee, remove from membership on the Committee all or any portion of its members, and/or appoint such person or persons as it desires to fill any vacancy existing on the Committee, whether caused by removal, resignation or otherwise. The Board may disband the Committee at any time. 4.2 Authority of Administrator. (a) Authority to Interpret Plan. Subject to the express provisions of --------------------------- this Plan, the Administrator will have the power to implement, interpret and construe this Plan and any Awards and Award Documents or other documents defining the rights and obligations of the Company and Recipients hereunder and thereunder, to determine all questions arising hereunder and thereunder, and to adopt and amend such rules and regulations for the administration hereof and thereof as it may deem desirable. The interpretation and construction by the Administrator of any provisions of this Plan or of any Award or Award Document, and any action taken by, or inaction of, the Administrator relating to this Plan or any Award or Award Document, will be within the discretion of the Administrator and will be conclusive and binding upon all persons. Subject only to compliance with the express provisions hereof, the Administrator may act in its discretion in matters related to this Plan and any and all Awards and Award Documents. (b) Authority to Grant Awards. Subject to the express provisions of ------------------------- this Plan, the Administrator may from time to time in its discretion select the Eligible Persons to whom, and the time or times at which, Awards will be granted or sold, the nature of each Award, the number of shares of Common Stock or the number of rights that make up or underlie each Award, the exercise price and period (if applicable) for the exercise of each Award, and such other terms and conditions applicable to each individual Award as the Administrator may determine. Any and all terms and conditions of Awards may be established by the Administrator without regard to existing Awards or other grants and without incurring any obligation of the Company in respect of subsequent Awards. The Administrator may grant at any time new Awards to an Eligible Person who has previously received Awards or other grants (including other stock options) regardless of the status of such other Awards or grants. The Administrator may grant Awards singly or in combination or in tandem with other Awards as it determines in its discretion. 3

(c) Procedures. Subject to the Company's charter or bylaws or any ---------- Board resolution conferring authority on the Committee, any action of the Administrator with respect to the administration of this Plan must be taken pursuant to a majority vote of the authorized number of members of the Administrator or by the unanimous written consent of its members; provided, however, that (i) if the Administrator is the Committee and consists of two (2) members, then actions of the Administrator must be unanimous, and (ii) actions taken by the Board will be valid if approved in accordance with applicable law. 4.3 No Liability. No member of the Board or the Committee or any designee thereof will be liable for any action or inaction with respect to this Plan or any Award or any transaction arising under this Plan or any Award except in circumstances constituting bad faith of such member. 4.4 Amendments. (a) Plan Amendments. The Administrator may at any time and from time --------------- to time in its discretion, insofar as permitted by applicable law, rule or regulation and subject to Section 4.4(c), suspend or discontinue this Plan or -------------- revise or amend it in any respect whatsoever, and this Plan as so revised or amended will govern all Awards, including those granted before such revision or amendment. Without limiting the generality of the foregoing, the Administrator is authorized to amend this Plan to comply with or take advantage of amendments to applicable laws, rules or regulations, including the Securities Act, the Exchange Act, the IRC, or the rules of any exchange or market system upon which the Common Stock is listed or trades, or any rules or regulations promulgated thereunder. No stockholder approval of any amendment or revision will be required unless such approval is required by applicable law, rule or regulation. (b) Award Amendments. The Administrator may at any time and from time ---------------- to time in its discretion, subject to Section 4.4(c) and compliance with -------------- applicable statutory or administrative requirements, accelerate or extend the vesting or exercise period of any Award as a whole or in part, and make such other modifications in the terms and conditions of an Award as it deems advisable. (c) Limitation. Except as otherwise provided in this Plan or in the ---------- applicable Award Document, no amendment, revision, suspension or termination of this Plan or an outstanding Award that would cause an Incentive Stock Option to cease to qualify as such or that would alter, impair or diminish in any material respect any rights or obligations under any Award theretofore granted under this Plan may be effected without the written consent of the Recipient to whom such Award was granted. 4.5 Other Compensation Plans. The adoption of this Plan will not affect any other stock option, incentive or other compensation plans in effect from time to time for the Company, and this Plan will not preclude the Company from establishing any other forms of incentive or other compensation for employees, directors, advisors or consultants of the Company, whether or not approved by stockholders. 4

4.6 Successors. Except as otherwise provided in an individual Award Document, in the event of a Reorganization in which the Company is not the surviving entity or in which the Company is the surviving entity but in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such Reorganization, each Award will terminate immediately prior to such Reorganization, unless the Award is assumed by the successors or assigns of the Company. 4.7 References to Successor Statutes, Regulations and Rules. Any reference in this Plan to a particular statute, regulation or rule will also refer to any successor provision of such statute, regulation or rule. 4.8 Invalid Provisions. In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity or unenforceability is not to be construed as rendering any other provisions contained herein invalid or unenforceable, and all such other provisions are to be given full force and effect to the same extent as though the invalid and unenforceable provision were not contained herein. 4.9 Governing Law. This Agreement will be governed by and interpreted in accordance with the internal laws of the State of Delaware, without giving effect to the principles of the conflicts of laws thereof. 4.10 Interpretation. Headings herein are for convenience of reference only, do not constitute a part of this Plan, and will not affect the meaning or interpretation of this Plan. References herein to Sections or Articles are references to the referenced Section or Article hereof, unless otherwise specified. ARTICLE V GENERAL AWARD PROVISIONS 5.1 Participation in Plan. (a) Eligibility to Receive Awards. A person is eligible to receive ----------------------------- grants of Awards if, at the time of the grant of the Award, such person is an Eligible Person or has received an offer of employment from the Company, provided that Awards granted to a person who has received an offer of employment will terminate and be forfeited without consideration if the employment offer is not accepted within such time as may be specified by the Company. Status as an Eligible Person will not be construed as a commitment that any Award will be granted under this Plan to an Eligible Person or to Eligible Persons generally. (b) Eligibility to Receive Incentive Stock Options. Incentive Stock ---------------------------------------------- Options may be granted only to Eligible Persons meeting the employment requirements of Section 422 of the IRC. (c) Awards to Foreign Nationals. Notwithstanding anything to the --------------------------- contrary herein, the Administrator may, in order to fulfill the purposes of this Plan, modify grants of 5

Awards to Recipients who are foreign nationals or employed outside of the United States to recognize differences in applicable law, tax policy or local custom. 5.2 Award Documents. Each Award must be evidenced by an agreement duly executed on behalf of the Company and by the Recipient or, in the Administrator's discretion, a confirming memorandum issued by the Company to the Recipient, setting forth such terms and conditions applicable to the Award as the Administrator may in its discretion determine. Awards will not be deemed made or binding upon the Company, and Recipients will have no rights thereto, until such an agreement is entered into between the Company and the Recipient or such a memorandum is delivered by the Company to the Recipient, but an Award may have an effective date prior to the date of such an agreement or memorandum. Award Documents may be (but need not be) identical and must comply with and be subject to the terms and conditions of this Plan, a copy of which will be provided to each Recipient and incorporated by reference into each Award Document. Any Award Document may contain such other terms, provisions and conditions not inconsistent with this Plan as may be determined by the Administrator. In case of any conflict between this Plan and any Award Document, this Plan shall control. 5.3 Payment For Awards. (a) Payment of Exercise Price. The exercise price or other payment ------------------------- for an Award is payable upon the exercise of a Stock Option or upon other purchase of shares pursuant to an Award granted hereunder by delivery of legal tender of the United States or payment of such other consideration as the Administrator may from time to time deem acceptable in any particular instance; provided, however, that the Administrator may, in the exercise of its discretion, allow exercise of an Award in a broker-assisted or similar transaction in which the exercise price is not received by the Company until promptly after exercise. (b) Company Assistance. The Company may assist any person to whom an ------------------ Award is granted (including, without limitation, any officer or director of the Company) in the payment of the purchase price or other amounts payable in connection with the receipt or exercise of that Award, by lending such amounts to such person on such terms and at such rates of interest and upon such security (if any) as may be consistent with applicable law and approved by the Administrator. In case of such a loan, the Administrator may require that the exercise be followed by a prompt sale of some or all of the underlying shares and that a portion of the sale proceeds be dedicated to full payment of the exercise price and amounts required pursuant to Section 5.10. ------------ (c) Cashless Exercise. If permitted in any case by the Administrator ----------------- in its discretion, the exercise price for Awards may be paid by capital stock of the Company delivered in transfer to the Company by or on behalf of the person exercising the Award and duly endorsed in blank or accompanied by stock powers duly endorsed in blank, with signatures guaranteed in accordance with the Exchange Act if required by the Administrator; or retained by the Company from the stock otherwise issuable upon exercise or surrender of vested and/or exercisable Awards or other equity awards previously granted to the Recipient and being exercised (if applicable) (in either case valued at Fair Market Value as of the exercise date); or such other consideration as 6

the Administrator may from time to time in the exercise of its discretion deem acceptable in any particular instance. (d) No Precedent. Recipients will have no rights to the assistance ------------ described in Section 5.3(b) or the exercise techniques described in Section -------------- ------- 5.3(c), and the Company may offer or permit such assistance or techniques on an ------ ad hoc basis to any Recipient without incurring any obligation to offer or permit such assistance or techniques on other occasions or to other Recipients. 5.4 No Employment Rights. Nothing contained in this Plan (or in Award Documents or in any other documents related to this Plan or to Awards) will confer upon any Eligible Person or Recipient any right to continue in the employ of or engagement by the Company or any Affiliated Entity or constitute any contract or agreement of employment or engagement, or interfere in any way with the right of the Company or any Affiliated Entity to reduce such person's compensation or other benefits or to terminate the employment or engagement of such Eligible Person or Recipient, with or without cause. Except as expressly provided in this Plan or in any statement evidencing the grant of an Award, the Company has the right to deal with each Recipient in the same manner as if this Plan and any such statement evidencing the grant of an Award did not exist, including, without limitation, with respect to all matters related to the hiring, discharge, compensation and conditions of the employment or engagement of the Recipient. Unless otherwise set forth in a written agreement binding upon the Company or an Affiliated Entity, all employees of the Company or an Affiliated Entity are "at will" employees whose employment may be terminated by the Company or the Affiliated Entity at any time for any reason or no reason, without payment or penalty of any kind. Any question(s) as to whether and when there has been a termination of a Recipient's employment or engagement, the reason (if any) for such termination, and/or the consequences thereof under the terms of this Plan or any statement evidencing the grant of an Award pursuant to this Plan will determined by the Administrator and the Administrator's determination thereof will final and binding. 5.5 Restrictions Under Applicable Laws and Regulations. (a) Government Approvals. All Awards will be subject to the -------------------- requirement that, if at any time the Company determines, in its discretion, that the listing, registration or qualification of the securities subject to Awards granted under this Plan upon any securities exchange or interdealer quotation system or under any federal, state or foreign law, or the consent or approval of any government or regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such an Award or the issuance, if any, or purchase of shares in connection therewith, such Award may not be exercised as a whole or in part unless and until such listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Company. During the term of this Plan, the Company will use its reasonable efforts to seek to obtain from the appropriate governmental and regulatory agencies any requisite qualifications, consents, approvals or authorizations in order to issue and sell such number of shares of its Common Stock as is sufficient to satisfy the requirements of this Plan. The inability of the Company to obtain any 7

such qualifications, consents, approvals or authorizations will relieve the Company of any liability in respect of the nonissuance or sale of such stock as to which such qualifications, consents, approvals or authorizations pertain. (b) No Registration Obligation; Recipient Representations. The ----------------------------------------------------- Company will be under no obligation to register or qualify the issuance of Awards or underlying securities under the Securities Act or applicable state securities laws. Unless the issuance of Awards and underlying securities have been registered under the Securities Act and qualified or registered under applicable state securities laws, the Company shall be under no obligation to issue any Awards or underlying securities unless the Awards and underlying securities may be issued pursuant to applicable exemptions from such registration or qualification requirements. In connection with any such exempt issuance, the Administrator may require the Recipient to provide a written representation and undertaking to the Company, satisfactory in form and scope to the Company, that such Recipient is acquiring such Awards and underlying securities for such Recipient's own account as an investment and not with a view to, or for sale in connection with, the distribution of any such securities, and that such person will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act and other applicable law, and that if securities are issued without registration, a legend to this effect (together with any other legends deemed appropriate by the Administrator) may be endorsed upon the securities so issued, and to the effect of any additional representations that are appropriate in light of applicable securities laws and rules. The Company may also order its transfer agent to stop transfers of such shares. The Administrator may also require the Recipient to provide the Company such information and other documents as the Administrator may request in order to satisfy the Administrator as to the investment sophistication and experience of the Recipient and as to any other conditions for compliance with any such exemptions from registration or qualification. 5.6 Stockholder Agreement and Additional Conditions. Unless otherwise determined by the Company in any particular case, each Award consisting of equity securities or securities convertible or exercisable for equity securities shall be contingent upon the Recipient thereof, as a condition (which may be waived in any case by the Company) to the Company's issuance of equity securities to the Recipient pursuant to the Award, entering into a Stockholder Agreement not substantially inconsistent with the form thereof attached hereto as Exhibit A (the "Stockholder Agreement"), and any conflict between such an --------- agreement and this Plan will be resolved in favor of the Plan. Subject to the California Securities Law and federal securities laws, any Award may also be subject to such other provisions (whether or not applicable to any other Award or Recipient) as the Administrator deems appropriate, including without limitation provisions for the forfeiture of or restrictions on resale or other disposition of securities of the Company acquired under this Plan, provisions giving the Company the right to repurchase securities of the Company acquired under this Plan in the event the Recipient leaves the Company for any reason or elects to effect any disposition thereof. 5.7 No Privileges re: Stock Ownership or Specific Assets. Except as otherwise set forth herein, a Recipient or a permitted transferee of an Award will have no rights as a stockholder with respect to any shares issuable or issued in connection with the Award until the 8

Recipient has delivered to the Company all amounts payable and performed all obligations required to be performed in connection with exercise of the Award and the Company has issued such shares. No person will have any right, title or interest in any fund or in any specific asset (including shares of capital stock) of the Company by reason of any Award granted hereunder. Neither this Plan (or any documents related hereto) nor any action taken pursuant hereto is to be construed to create a trust of any kind or a fiduciary relationship between the Company and any person. To the extent that any person acquires a right to receive an Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. 5.8 Nonassignability. No Award is assignable or transferable except: (a) by will or by the laws of descent and distribution; or (b) subject to the final sentence of this Section 5.8, upon dissolution of marriage pursuant to a ----------- qualified domestic relations order or, in the discretion of the Administrator and under circumstances that would not adversely affect the interests of the Company, transfers for estate planning purposes or pursuant to a nominal transfer that does not result in a change in beneficial ownership. During the lifetime of a Recipient, an Award granted to such person will be exercisable only by the Recipient (or the Recipient's permitted transferee) or such person's guardian or legal representative. Notwithstanding the foregoing, (i) any assignment or transfer of an Award will immediately result in the termination of vesting as of the date of transfer or assignment and (ii) Stock Options and stock purchase rights that are California Regulated Securities may not be transferred other than by will or the laws of descent and distribution at any time that this Plan is a California Regulated Plan, and Stock Options intended to be treated as Incentive Stock Options (or other Awards subject to transfer restrictions under the IRC) may not be assigned or transferred in violation of Section 422(b)(5) of the IRC or the regulations thereunder, and nothing herein is intended to allow such assignment or transfer. 5.9 Information To Recipients. (a) Provision of Information. The Administrator in its sole ------------------------ discretion may determine what, if any, financial and other information is to be provided to Recipients and when such financial and other information is to be provided after giving consideration to applicable federal and state laws, rules and regulations, including, without limitation, applicable federal and state securities laws, rules and regulations, provided that during such times as this Plan is a California Regulated Plan, holders of California Regulated Securities will receive financial statements of the Company to the extent required by the California Securities Rules. (b) Confidentiality. The furnishing of financial and other --------------- information that is confidential to the Company is subject to the Recipient's agreement to maintain the confidentiality of such financial and other information, and not to use the information for any purpose other than evaluating the Recipient's position under this Plan. The Administrator may impose other restrictions on the access to and use of such confidential information and may require a Recipient to acknowledge the Recipient's obligations under this Section 5.9(b) (which acknowledgment is not to be a -------------- condition to Recipient's obligations under this Section 5.9(b)). --------------- 5.10 Withholding Taxes. Whenever the granting, vesting or exercise of any Award, or the issuance of any securities upon exercise of any Award or transfer thereof, gives rise to tax 9

or tax withholding liabilities or obligations, the Administrator will have the right as a condition thereto to require the Recipient to remit to the Company an amount sufficient to satisfy any federal, state and local withholding tax requirements arising in connection therewith. The Administrator may, in the exercise of its discretion, allow satisfaction of tax withholding requirements by accepting delivery of stock of the Company or by withholding a portion of the stock otherwise issuable in connection with an Award, in each case valued at Fair Market Value as of the date that such delivery or withholding, as the case may be, is determined. 5.11 Legends on Awards and Stock Certificates. Each Award Document and each certificate representing securities acquired upon vesting or exercise of an Award must be endorsed with all legends, if any, required by applicable federal and state securities and other laws to be placed on the Award Document and/or the certificate. The Award Documents and share certificates may also contain legends reflecting the restrictions and rights contained in the Stockholder Agreement as long as such restrictions and rights are applicable. The determination of which legends, if any, will be placed upon Award Documents or the certificates will be made by the Administrator in its discretion and such decision will be final and binding. 5.12 Effect of Termination of Employment on Awards. (a) Termination of Vesting. Notwithstanding anything to the contrary ---------------------- herein, but subject to the California Securities Rules, and subject to Section ------- 5.12(b), Awards will be exercisable by a Recipient (or the Recipient's successor ------- in interest) following such Recipient's termination of employment only to the extent that installments thereof had become exercisable on or prior to the date of such termination and are not forfeited pursuant to Section 5.15. ------------ (b) Alteration of Vesting and Exercise Periods. Notwithstanding ------------------------------------------ anything to the contrary herein, but subject to the California Securities Rules, the Administrator may in its discretion (i) designate shorter or longer periods following a Recipient's termination of employment during which Awards may vest or be exercised; provided, however, that any shorter periods determined by the Administrator will be effective only if provided for in this Plan or the instrument that evidences the grant to the Recipient of the affected Award or if such shorter period is agreed to in writing by the Recipient, and (ii) accelerate the vesting of all or any portion of any Awards by increasing the number of shares purchasable at any time. (c) Leave of Absence. In the case of any employee on an approved ---------------- leave of absence, unless the Administrator makes such provisions respecting continuance of Awards granted to such employee as the Administrator in its discretion deems appropriate, vesting of any Award shall be discontinued for the period of the leave of absence and shall resume again at the conclusion of the leave of absence with no credit given for the period of the leave, provided that in no event will an Award be exercisable after the date such Award would expire in accordance with its terms had the Recipient remained continuously employed. (d) General Cessation. Except as otherwise set forth in this Plan or ----------------- an Award Document or as determined by the Administrator in its discretion, all Awards granted to a Recipient, and all of such Recipient's rights thereunder, will terminate upon termination for any reason of such Recipient's employment with the Company or any Affiliated Entity (or cessation 10

of any other service relationship between the Recipient and the Company or any Affiliated Entity in place as of the date the Award was granted). 5.13 Lock-Up Agreements. Each Recipient agrees as a condition to receipt of an Award that, in connection with any public offering by the Company of its equity securities and upon the request of the Company and the principal underwriter (if any) in such public offering, any shares of Common Stock acquired or that may be acquired upon exercise or vesting of an Award may not be sold, offered for sale, encumbered, or otherwise disposed of or subjected to any transaction that will involve any sales of securities of the Company, without the prior written consent of the Company and such underwriter for a period of not more than 365 days after the effective date of the registration statement for such public offering. Each Recipient will, if requested by the Company or the principal underwriter, enter into a separate agreement to the effect of this Section 5.13. Each lead underwriter of a public offering of the Company's ------------ stock, during the period of such offering and for the period of not more than 365 days thereafter, is an intended beneficiary of this Section 5.13. ------------- 5.14 Restrictions on Common Stock and Other Securities. Common Stock or other securities of the Company issued or issuable in connection with any Award will be subject to all of the restrictions imposed under this Plan upon Common Stock issuable or issued upon exercise of Stock Options, except as otherwise determined by the Administrator. 5.15 Cancellation and Recision of Awards. Unless an Award Document or other separate written agreement binding upon the Company provides otherwise, the Administrator may cancel any unexpired, unpaid or deferred Award (whether or not vested) at any time if the Recipient thereof fails at any time to comply with all applicable provisions of the Award Document or this Plan, or does any of the following: (a) During employment or engagement with the Company or any Affiliated Entity or at any time within 365 days after termination of employment or engagement with the Company or any Affiliated Entity, renders services for any organization or engages directly or indirectly in any business that, in the judgment of the Administrator or any person specifically designated by the Administrator, is competitive with the Company or any Affiliated Entity, or which organization or business, or the rendering of services to such organization or business, is otherwise prejudicial to or in conflict with the business or interests of the Company or any Affiliated Entity. For a Recipient whose employment has terminated, the judgment of the Administrator or any person specifically designated by the Administrator shall be based upon the Recipient's position and responsibilities while employed by the Company or any Affiliated Entity, the Recipient's post-employment responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Company or any Affiliated Entity and the other organization or business, the effect on the customers, suppliers and competitors of the Company or Affiliated Entity of the Recipient's assuming the post-employment position, the guidelines established in any employee handbook, any employment agreement with the Recipient, and such other considerations as are deemed by the Company to be relevant given the applicable facts and circumstances. 11

(b) During employment or engagement with the Company or any Affiliated Entity or at any time thereafter, fails to comply with any confidentiality agreement with the Company or any Affiliated Entity to which the Recipient is party, or with the policies of the Company or Affiliated Entity regarding nondisclosure of confidential information, or without prior written authorization from the Company or any Affiliated Entity, discloses to anyone outside the Company or any Affiliated Entity, or uses for any purpose or in any context other than in performance of the Recipient's duties to the Company or any Affiliated Entity, any confidential or trade secret information of the Company. (c) During employment or engagement with the Company or any Affiliated Entity or at any time thereafter, fails to comply with any agreement with the Company or any Affiliated Entity regarding assignment of inventions, or to otherwise disclose promptly and assign to the Company or any Affiliated Entity all right, title and interest in any invention or idea, patentable or not, made or conceived by the Recipient during and within the scope of employment or engagement by the Company or any Affiliated Entity, relating in any manner to the actual or anticipated business, research, or development work of the Company or any Affiliated Entity, or to do anything reasonably necessary to enable the Company or any Affiliated Entity to secure a patent where appropriate in the United States and other countries. (d) During employment or engagement with the Company or any Affiliated Entity or at any time thereafter, breaches any agreement with or duty to the Company or any Affiliated Entity. Upon and as a condition to exercise of any Award, a Recipient shall certify on a form acceptable to the Company that he or she is in compliance with the terms and conditions of this Plan and any applicable Award Document and has not done any of the things described in this Section 5.15. Furthermore, if a ------------ Recipient does any of the things described in this Section 5.15 within 180 days ------------ after any exercise, payment or delivery pursuant to an Award, the Company may rescind such exercise, payment or delivery. The Company shall notify the Recipient in writing of any such recision within two years after such exercise, payment or delivery. Within ten days after receiving such notice from the Company, a Recipient shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery pursuant to an Award. Such payment shall be made by returning to the Company all shares of capital stock that the Recipient received in connection with the rescinded exercise, payment or delivery, or if such shares have been transferred by the Recipient, then by paying in cash to the Company the Fair Market Value thereof at the time of transfer. To assist in enforcement of the Company's recision right described above, the Company may, in its discretion, retain any Common Stock or other consideration otherwise deliverable to a Recipient in connection with an Award until the recision period described above has lapsed. 12

ARTICLE VI AWARDS 6.1 Stock Options. (a) Nature of Stock Options. Stock Options may be Incentive Stock ----------------------- Options or Nonqualified Stock Options. (b) Option Exercise Price. The exercise price for each Stock Option --------------------- will be determined by the Administrator as of the date such Stock Option is granted. Subject to Section 4.4(b), the exercise price may be greater than or -------------- less than the Fair Market Value of the Common Stock subject to the Stock Option as of the date of grant, provided that in no event may the exercise price per share be less than the par value, if any, per share of the Common Stock subject to the Stock Option, and provided further that the exercise price of Stock Options that are California Regulated Securities granted while this Plan is a California Regulated Plan may not be less than 85% of the Fair Market Value of the Common Stock as of the date of grant, or 110% of the Fair Market Value of the Common Stock as of the date of grant in the case of Stock Options granted to Recipients owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporations. (c) Option Period and Vesting. Stock Options granted hereunder will ------------------------- vest and may be exercised as determined by the Administrator, except that (i) Stock Options that are California Regulated Securities granted while this Plan is a California Regulated Plan will vest and become exercisable at the rate of at least 20% per year over five years from the date of grant, and (ii) exercise of Stock Options after termination of the Recipient's employment shall be subject to Section 5.12. Each Stock Option granted hereunder and all rights or ------------ obligations thereunder shall expire on such date as may be determined by the Administrator, but not later than ten (10) years after the date the Stock Option is granted and may be subject to earlier termination as provided herein or in the Award Document. Except as otherwise provided herein, a Stock Option will become exercisable, as a whole or in part, on the date or dates specified by the Administrator and thereafter will remain exercisable until the exercise, expiration or earlier termination of the Stock Option. (d) Exercise of Stock Options. The exercise price for Stock Options ------------------------- will be paid as set forth in Section 5.3. No Stock Option will be exercisable ----------- except in respect of whole shares, and fractional share interests shall be disregarded. Not fewer than 100 shares of Common Stock may be purchased at one time and Stock Options must be exercised in multiples of 100 unless the number purchased is the total number of shares for which the Stock Option is exercisable at the time of exercise. A Stock Option will be deemed to be exercised when the Secretary or other designated official of the Company receives written notice of such exercise from the Recipient in the form of Exhibit B hereto or such other form as the Company may specify from time to --------- time, together with payment of the exercise price in accordance with Section 5.3 ----------- and any amounts required under Section 5.10 or, with permission of the ------------ Administrator, arrangement for such payment. Notwithstanding any other provision of this Plan, the Administrator may impose, by rule and/or in Award Documents, such conditions upon the 13

exercise of Stock Options (including, without limitation, conditions limiting the time of exercise to specified periods) as may be required to satisfy applicable regulatory requirements, including, without limitation, Rule 16b-3 and Rule 10b-5 under the Exchange Act, and any amounts required under Section ------- 5.10, or any applicable section of or regulation under the IRC. ---- (e) Termination of Employment. ------------------------- (i) Termination for Just Cause. Subject to Section 5.12 and -------------------------- ------------ except as otherwise provided in a written agreement between the Company or an Affiliated Entity and the Recipient, which may be entered into at any time before or after termination of employment, or, with respect to California Regulated Securities, as required by the California Securities Rules while this Plan is a California Regulated Plan, in the event of a Just Cause Dismissal of a Recipient all of the Recipient's unexercised Stock Options, whether or not vested, will expire and become unexercisable as of the date of such Just Cause Dismissal. (ii) Termination Other Than for Just Cause. Subject to Section ------------------------------------- ------- 5.12 and except as otherwise provided in a written agreement between the Company ---- or an Affiliated Entity and the Recipient, which may be entered into at any time before or after termination of employment, if a Recipient's employment with the Company or any Affiliated Entity terminates for: (A) any reason other than for Just Cause Dismissal, death, Permanent Disability or Retirement, the Recipient's Awards will cease vesting as of the date of employment termination and such Awards, whether or not vested, will expire and become unexercisable as of the earlier of: (x) the date such Stock Options would expire in accordance with their terms had the Recipient remained employed; and (y) 90 days after the date of employment termination. (B) death or Permanent Disability or Retirement, the Recipient's unexercised Awards will, whether or not vested, expire and become unexercisable as of the earlier of: (x) the date such Awards would expire in accordance with their terms had the Recipient remained employed; and (y) 365 days after the date of employment termination. (f) Special Provisions Regarding Incentive Stock Options. ---------------------------------------------------- Notwithstanding anything herein to the contrary, (i) The exercise price and vesting period of any Stock Option intended to be treated as an Incentive Stock Option must comply with the provisions of Section 422 of the IRC and the regulations thereunder. As of the Effective Date, such provisions require, among other matters, that: (A) the exercise price must not be less than the Fair Market Value of the underlying stock as of the date the Incentive Stock Option is granted, and not less than 110% of the Fair Market Value as of such date in the case of a grant to a Significant Stockholder; and (B) that the Incentive Stock Option not be exercisable after the expiration of ten (10) years from the date of grant or the expiration of five (5) years from the date of grant in the case of an Incentive Stock Option granted to a Significant Stockholder. 14

(ii) The aggregate Fair Market Value (determined as of the respective date or dates of grant) of the Common Stock for which one or more Options granted to any Recipient under this Plan (or any other option plan of the Company or any of its subsidiaries or affiliates) may for the first time become exercisable as Incentive Stock Options under the federal tax laws during any one calendar year may not exceed $100,000. (iii) Any Stock Options granted as Incentive Stock Options pursuant to this Plan that for any reason fail or cease to qualify as such will be treated as Nonqualified Stock Options. If the limit described in Section ------- 6.1(f)(ii) is exceeded, the earliest granted Stock Options will be treated as ---------- Incentive Stock Options, up to such limit. 6.2 Performance Awards. (a) Grant of Performance Award. Subject to California Securities -------------------------- Rules, the Administrator will determine in its discretion the performance criteria (which need not be identical and may be established on an individual or group basis) governing Performance Awards, the terms thereof, and the form and time of payment of Performance Awards. (b) Payment of Award. Upon satisfaction of the conditions applicable ---------------- to a Performance Award, payment will be made to the Recipient in cash, in shares of Common Stock valued at Fair Market Value as of the date payment is due, or in a combination of Common Stock and cash, as the Administrator in its discretion may determine. 6.3 Restricted Stock. (a) Award of Restricted Stock. The Administrator will determine, ------------------------- subject to applicable law, the Purchase Price (if any), the terms of payment of the Purchase Price, the restrictions upon the Restricted Stock, and when such restrictions will lapse, provided that the Purchase Price (if any) for Restricted Stock that constitutes California Regulated Securities granted while this Plan is a California Regulated Plan may not be less than 85% of the Fair Market Value of the Common Stock as of the date of grant or purchase, or 100% of the Fair Market Value of the Common Stock as of the date of grant to or purchase by Recipients owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporations. (b) Requirements of Restricted Stock. All shares of Restricted Stock -------------------------------- granted or sold pursuant to this Plan will be subject to the following conditions: (i) No Transfer. The shares may not be sold, assigned, ----------- transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered until the restrictions are removed or expire; (ii) Certificates. The Administrator may require that the ------------ certificates representing Restricted Stock granted or sold to a Recipient remain in the physical custody of an escrow holder or the Company until all restrictions are removed or expire; 15

(iii) Restrictive Legends. Each certificate representing ------------------- Restricted Stock granted or sold to a Recipient pursuant to this Plan will bear such legend or legends making reference to the restrictions imposed upon such Restricted Stock as the Administrator in its discretion deems necessary or appropriate to enforce such restrictions; and (iv) Other Restrictions. The Administrator may impose such other ------------------ conditions on Restricted Stock as the Administrator may deem advisable, including, without limitation, restrictions under the Securities Act, under the Exchange Act, under the requirements of any stock exchange or interdealer quotation system upon which such Restricted Stock or other securities of the Company are then listed or traded and under any blue sky or other securities laws applicable to such shares. (c) Lapse of Restrictions. The restrictions imposed upon Restricted --------------------- Stock will lapse in accordance with such terms or other conditions as are determined by the Administrator consistent with applicable laws. (d) Rights of Recipient. Subject to the provisions of Section 6.3(b) ------------------- -------------- and any restrictions imposed upon the Restricted Stock, the Recipient will have all rights of a stockholder with respect to the Restricted Stock granted or sold to such Recipient under this Plan, including, without limitation, the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto. (e) Termination of Employment. Unless the Administrator in its ------------------------- discretion determines otherwise, and notwithstanding the Stockholder Agreement, if a Recipient's employment with the Company or any Affiliated Entity terminates for any reason, all of the Recipient's Restricted Stock remaining subject to restrictions on the date of such termination of employment may be repurchased by the Company at its discretion at the Purchase Price (if any) paid by the Recipient to the Company, without interest or premium, and otherwise returned to the Company without consideration. Shares no longer subject to the restrictions imposed in connection with the grant will be governed by the Stockholder Agreement. 6.4 Stock Appreciation Rights. (a) Granting of Stock Appreciation Rights. The Administrator may at ------------------------------------- any time and from time to time approve the grant to Eligible Persons of Stock Appreciation Rights, related or unrelated to Stock Options. (b) SARs Related to Options. ----------------------- (i) A Stock Appreciation Right related to a Stock Option will entitle the holder of the related Stock Option, upon exercise of the Stock Appreciation Right, to surrender such Stock Option, or any portion thereof to the extent previously vested but unexercised, with respect to the number of shares as to which such Stock Appreciation Right is exercised, and to receive payment of an amount computed pursuant to Section 6.4(b)(iii). Such Stock Option ------------------- will, to the extent surrendered, then cease to be exercisable. 16

(ii) A Stock Appreciation Right related to a Stock Option hereunder will be exercisable at such time or times, and only to the extent that, the related Stock Option is exercisable, and will not be transferable except to the extent that such related Stock Option may be transferable (and under the same conditions), will expire no later than the expiration of the related Stock Option, and may be exercised only when the market price of the Common Stock subject to the related Stock Option exceeds the exercise price of the Stock Option. (iii) Upon the exercise of a Stock Appreciation Right related to a Stock Option, the Recipient will be entitled to receive payment of an amount determined by multiplying: (A) the difference obtained by subtracting the exercise price of a share of Common Stock specified in the related Stock Option from the Fair Market Value of a share of Common Stock on the date of exercise of such Stock Appreciation Right (or as of such other date or as of the occurrence of such event as may have been specified in the instrument evidencing the grant of the Stock Appreciation Right), by (B) the number of shares as to which such Stock Appreciation Right is exercised. (c) SARs Unrelated to Options. The Administrator may grant Stock ------------------------- Appreciation Rights unrelated to Stock Options. Section 6.4(b)(iii) will govern ------------------- the amount payable at exercise under such Stock Appreciation Right, except that in lieu of an option exercise price the initial base amount specified in the Award shall be used. (d) Limits. Notwithstanding the foregoing, the Administrator, in its ------ discretion, may place a dollar limitation on the maximum amount that will be payable upon the exercise of a Stock Appreciation Right. (e) Payments. Payment of the amount determined under the foregoing -------- provisions may be made solely in whole shares of Common Stock valued at their Fair Market Value on the date of exercise of the Stock Appreciation Right or, alternatively, at the discretion of the Administrator, in cash or in a combination of cash and shares of Common Stock as the Administrator deems advisable. The Administrator has full discretion to determine the form in which payment of a Stock Appreciation Right will be made and to consent to or disapprove the election of a Recipient to receive cash in full or partial settlement of a Stock Appreciation Right. If the Administrator decides to make full payment in shares of Common Stock, and the amount payable results in a fractional share, payment for the fractional share will be made in cash. 6.5 Stock Payments. The Administrator may approve Stock Payments to any Eligible Person on such terms and conditions as the Administrator may determine. Stock Payments will replace cash compensation at the Fair Market Value of the Common Stock on the date payment is due. 6.6 Dividend Equivalents. The Administrator may grant Dividend Equivalents to any Recipient who has received a Stock Option, SAR or other Award denominated in shares of Common Stock. Dividend Equivalents may be paid in cash, Common Stock or other Awards; the amount of Dividend Equivalents paid other than in cash will be determined by the Administrator by application of such formula as the Administrator may deem appropriate to translate the cash value of dividends paid to the alternative form of payment of the Dividend 17

Equivalent. Dividend Equivalents will be computed as of each dividend record date and will be payable to recipients thereof at such time as the Administrator may determine. 6.7 Stock Bonuses. The Administrator may issue Stock Bonuses to Eligible Persons on such terms and conditions as the Administrator may determine. 6.8 Stock Sales. The Administrator may sell to Eligible Persons shares of Common Stock on such terms and conditions as the Administrator may determine. 6.9 Phantom Stock. The Administrator may grant Awards of Phantom Stock to Eligible Persons. Phantom Stock is a cash payment measured by the Fair Market Value of a specified number of shares of Common Stock on a specified date, or measured by the excess of such Fair Market Value over a specified minimum, which may but need not include a Dividend Equivalent. 6.10 Other Stock-Based Benefits. The Administrator is authorized to grant Other Stock-Based Benefits. Other Stock-Based Benefits are any arrangements granted under this Plan not otherwise described above that: (a) by their terms might involve the issuance or sale of Common Stock or other securities of the Company; or (b) involve a benefit that is measured, as a whole or in part, by the value, appreciation, dividend yield or other features attributable to a specified number of shares of Common Stock or other securities of the Company. ARTICLE VII SEVERABILITY If any provision of this Plan, or the application of such provision to any person or circumstances, is held invalid or unenforceable, the remainder of this Plan, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall continue in full force without being impaired or invalidated. ARTICLE VIII DEFINITIONS Capitalized terms used in this Plan and not otherwise defined have the meanings set forth below: "Administrator" means the Board as long as no Committee has been appointed and is in effect and also means the Committee to the extent that the Board has delegated authority thereto. "Affiliated Entity" means any Parent Corporation of the Company or Subsidiary Corporation of the Company or any other entity controlling, controlled by, or under common control with the Company. 18

"Applicable Dividend Period" means (i) the period between the date a Dividend Equivalent is granted and the date the related Stock Option, SAR, or other Award is exercised, terminates, or is converted to Common Stock, or (ii) such other time as the Administrator may specify in the written instrument evidencing the grant of the Dividend Equivalent. "Award" means any Stock Option, Performance Award, Restricted Stock, Stock Appreciation Right, Stock Payment, Stock Bonus, Stock Sale, Phantom Stock, Dividend Equivalent, or Other Stock-Based Benefit granted or sold to an Eligible Person under this Plan. "Award Document" means the agreement or confirming memorandum setting forth the terms and conditions of an Award. "Board" means the Board of Directors of the Company. "California Commissioner" means the Commissioner of Corporations of the State of California. "California Regulated Plan" means this Plan at any time that Awards and securities underlying Awards are California Regulated Securities and the Company relies upon the exemption provided by Section 25102(o) of the California Securities Law (or another exemption imposing comparable requirements) to exempt the issuance of securities under this Plan from qualification under the California Securities Law. "California Regulated Securities" means Awards and securities underlying Awards that are subject to the California Securities Law or the California Securities Rules. "California Securities Law" means the California Corporate Securities Law of 1968, as amended. "California Securities Rules" means the Rules of the California Commissioner adopted under the California Securities Law. "Committee" means any committee appointed by the Board to administer this Plan pursuant to Section 4.1. ----------- "Common Stock" means the common stock of the Company, as constituted on the Effective Date, and as thereafter adjusted under Section 3.4. ----------- "Company" means Broadband Sports, Inc., a Delaware corporation. "Dividend Equivalent" means a right granted by the Company under Section ------- 6.6 to a holder of a Stock Option, Stock Appreciation Right or other Award --- denominated in shares of Common Stock to receive from the Company during the Applicable Dividend Period payments equivalent to the amount of dividends payable to holders of the number of shares of Common Stock underlying such Stock Option, Stock Appreciation Right, or other Award. 19

"Effective Date" means December 7, 1998, which is the date this Plan was adopted by the Board whether or not stockholder approval had yet been obtained as of such date. "Eligible Person" includes directors, officers, employees, consultants and advisers of the Company or of any Affiliated Entity. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Act Registered Company" means that the Company has any class of any equity security registered pursuant to Section 12 of the Exchange Act. "Expiration Date" means the tenth (10th) anniversary of the Effective Date. "Fair Market Value" of a share of the Company's capital stock as of a particular date means: (i) if the stock is listed on an established stock exchange or exchanges (including for this purpose, the Nasdaq National Market), the arithmetic mean of the highest and lowest sale prices of the stock for the trading day immediately preceding such date on the primary exchange upon which the stock trades, as measured by volume, as published in The Wall Street Journal, or, if no sale price was quoted for such date, then as of the next preceding date on which such a sale price was quoted; or (ii) if the stock is not then listed on an exchange or the Nasdaq National Market, the average of the closing bid and asked prices per share for the stock in the over-the-counter market on such date (in the case of (i) or (ii), subject to adjustment as and if necessary and appropriate to set an exercise price not less than 100% of the fair market value of the stock on the date an Award is granted); or (iii) if the stock is not then listed on an exchange or quoted in the over-the-counter market, an amount determined in good faith by the Administrator, which need not necessarily be the Purchase Price under the Stockholder Agreement; provided, however, that (A) when appropriate, the Administrator in determining Fair Market Value of capital stock of the Company shall consider such factors as may be required by the California Securities Law and the California Securities Rules while this Plan is a California Regulated Plan, and may take into account such other factors as it may deem appropriate under the circumstances, and (B) if the stock is traded on the Nasdaq SmallCap Market and both sales prices and bid and asked prices are quoted or available, the Administrator may elect to determine Fair Market Value under either clause (i) or (ii) above. Notwithstanding the foregoing, the Fair Market Value of capital stock for purposes of grants of Incentive Stock Options must be determined in compliance with applicable provisions of the IRC. The Fair Market Value of rights or property other than capital stock of the Company means the fair market value thereof as determined by the Administrator on the basis of such factors as it may deem appropriate. "Incentive Stock Option" means a Stock Option that qualifies as an incentive stock option under Section 422 of the IRC. "IRC" means the Internal Revenue Code of 1986, as amended. "Just Cause Dismissal" means a termination of a Recipient's employment for any of the following reasons: (i) the Recipient violates any reasonable rule or regulation of the Board, the Company's President or Chief Executive Officer or the Recipient's superiors that results in 20

damage to the Company or any Affiliated Entity or which, after written notice to do so, the Recipient fails to correct within a reasonable time not exceeding 15 days; (ii) any willful misconduct or gross negligence by the Recipient in the responsibilities assigned to the Recipient; (iii) any willful failure to perform the Recipient's job as required to meet the objectives of the Company or any Affiliated Entity; (iv) any wrongful conduct of a Recipient which has an adverse impact on the Company or any Affiliated Entity or which constitutes a misappropriation of assets of the Company or any Affiliated Entity; (v) the Recipient does any of the things described in Section 5.15; or (vi) any other ------------ conduct that the Administrator reasonably determines constitutes Just Cause for Dismissal; provided, however, that if a Recipient is party to an employment agreement with the Company or any Affiliated Entity providing for just cause dismissal (or some comparable concept) of Recipient from Recipient's employment with the Company or any Affiliated Entity, "Just Cause Dismissal" for purposes of this Plan will have the same meaning as ascribed thereto or to such comparable concept in such employment agreement. "Nonqualified Stock Option" means a Stock Option that is not an Incentive Stock Option. "Other Stock-Based Benefits" means an Award granted under Section 6.10. ------------ "Parent Corporation" means any Parent Corporation as defined in Section 424(e) of the IRC. "Performance Award" means an Award under Section 6.2, payable in cash, ----------- Common Stock or a combination thereof, that vests and becomes payable over a period of time upon attainment of performance criteria established in connection with the grant of the Award. "Permanent Disability" means that the Recipient becomes physically or mentally incapacitated or disabled so that the Recipient is unable to perform substantially the same services as the Recipient performed prior to incurring such incapacity or disability (the Company, at its option and expense, being entitled to retain a physician to confirm the existence of such incapacity or disability, and the determination of such physician to be binding upon the Company and the Recipient), and such incapacity or disability continues for a period of three (3) consecutive months or six (6) months in any 12-month period or such other period(s) as may be determined by the Administrator with respect to any Award, provided that for purposes of determining the period during which an Incentive Stock Option may be exercised pursuant to Section 6.1(e), Permanent -------------- Disability shall mean "permanent and total disability" as defined in Section 22(e) of the IRC. "Person" means any person, entity or group, within the meaning of Section 13(d) or 14(d) of the Exchange Act, but excluding (i) the Company and its subsidiaries, (ii) any employee stock ownership or other employee benefit plan maintained by the Company and (iii) an underwriter or underwriting syndicate that has acquired the Company's securities solely in connection with a public offering thereof. "Phantom Stock" means an Award granted under Section 6.9. ----------- 21

"Plan" means this 1998 Equity Incentive Plan of the Company. "Plan Term" means the period during which this Plan remains in effect (commencing the Effective Date and ending on the Expiration Date). "Purchase Price" means the purchase price (if any) to be paid by a Recipient for Restricted Stock as determined by the Administrator (which price shall be at least equal to the minimum price required under applicable laws and regulations for the issuance of Common Stock which is nontransferable and subject to a substantial risk of forfeiture until specific conditions are met). "Recipient" means a person who has received an Award. "Reorganization" means any merger, consolidation or other reorganization. "Restricted Stock" means Common Stock that is the subject of an Award made under Section 6.3 and that is nontransferable and subject to a substantial risk ----------- of forfeiture until specific conditions are met, as set forth in this Plan and in any statement evidencing the grant of such Award. "Retirement" of a Recipient means the Recipient's resignation from the Company or any Affiliated Entity after reaching age 60 and at least five years of full-time employment by the Company or any Affiliated Entity without any circumstances that would justify a Just Cause Dismissal of the Recipient. "Securities Act" means the Securities Act of 1933, as amended. "Stockholder Agreement" has the meaning set forth in Section 5.6. ----------- "Significant Stockholder" is an individual who, at the time a Stock Option is granted to such individual under this Plan, owns more than ten percent (10%) of the combined voting power of all classes of stock of the Company or of any Parent Corporation or Subsidiary Corporation (after application of the attribution rules set forth in Section 424(d) of the IRC). "Stock Appreciation Right" or "SAR" means a right granted under Section 6.4 ----------- to receive a payment that is measured with reference to the amount by which the Fair Market Value of a specified number of shares of Common Stock appreciates from a specified date, such as the date of grant of the SAR, to the date of exercise. "Stock Bonus" means an issuance or delivery of unrestricted or restricted shares of Common Stock under Section 6.7 as a bonus for services rendered or for ----------- any other valid consideration under applicable law. "Stock Payment" means a payment in shares of the Company's Common Stock under Section 6.5 to replace all or any portion of the compensation or other ----------- payment (other than base salary) that would otherwise become payable to the Recipient in cash. 22

"Stock Option" means a right to purchase stock of the Company granted under Section 6.1 of this Plan. ----------- "Stock Sale" means a sale of Common Stock to an Eligible Person under Section 6.8. ----------- "Subsidiary Corporation" means any Subsidiary Corporation as defined in Section 424(f) of the IRC. 23

EXHIBIT A to BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN STOCKHOLDER AGREEMENT This Stockholder Agreement (this "Agreement") is made effective as of ___________________________, ___, by and among Broadband Sports, Inc., a Delaware corporation (the "Company"), and each of the Company's stockholders party hereto as evidenced by such stockholder's execution of the signature pages hereof or receipt in transfer of stock of the Company from another party hereto. The Company and its Stockholders (as defined below) desire to impose certain restrictions and obligations on themselves and the stock of the Company owned by each of the Stockholders. Therefore, in consideration of the foregoing premises and the mutual promises and agreements of the parties hereto and other good and valuable consideration, the parties hereto hereby agree as follows: I. DEFINITIONS Capitalized terms used herein and not otherwise defined have the respective meanings ascribed to them below. "Affiliate" of the Company means any entity controlling, controlled by, or under common control with the Company. "Majority Consent" to an action means consent to such action by Stockholders possessing more than fifty percent (50%) of the total voting interest represented by all outstanding voting securities of the Company owned by Qualified Stockholders. "Plan" means the Broadband Sports, Inc. 1998 Equity Incentive Plan. "Qualified Stockholder" at any time means any Stockholder who is at that ---- time (i) an officer, director, or employee of the Company or any Affiliate or (ii) a consultant, independent contractor or adviser of the Company who received equity securities or securities convertible or exercisable for equity securities pursuant to an Award (as defined in the Plan) granted under the Plan.

"Stockholder" at any time means each person or entity who at that time owns Shares and is party to this Agreement. No person will be a "Stockholder" entitled to the benefits of this Agreement at any time that such person is not bound by this Agreement. "Shares" means all equity securities of the Company now owned or hereafter acquired. "Special Consent" to an action means consent to such action by Stockholders possessing more than sixty-six and two-thirds percent (66 2/3%) of the total voting interest represented by all outstanding voting securities of the Company owned by Qualified Stockholders. "Transfer" means any transfer, sale, assignment, pledge, mortgage, hypothecation, encumbrance, gift, grant, bequest, or other disposition of any kind, of any Shares or any direct or indirect, contingent or non-contingent, beneficial interest in any Shares. Without limitation, any transfer or allocation of any rights in Shares upon death, pursuant to a marital dissolution (whether by agreement or court decree), a voluntary or involuntary bankruptcy or insolvency petition or proceeding, or any other court order or process shall be a Transfer for purposes of this Agreement. Notwithstanding the foregoing, however, any Transfer approved by Majority Consent shall not be considered to be a Transfer for purposes of this Agreement. II. RESTRICTIONS ON TRANSFER 2.01 Invalidity of Transfer Not Complying With This Agreement. No Transfer or attempted Transfer in contravention of this Agreement will be effective for any purpose or confer on any transferee or attempted transferee any rights whatsoever. 2.02 Legend on Share Certificates. Certificates representing Shares shall be stamped in a prominent manner with the following legend: "The transfer, sale, assignment, pledge, mortgage, hypothecation, encumbrance, gift or other disposition of the Shares represented by this certificate is restricted by a Stockholder Agreement, a copy of which may be obtained at the principal office of this corporation." 2.03 Stop Transfer. The Company shall not recognize, and shall issue appropriate instructions to its transfer agent (if any) to stop, any Transfer or attempted Transfer in contravention of this Agreement. III. CONDITIONS OF TRANSFER 3.01 Rights on Transfer. Except as provided in Section 3.03 and subject ------------ to Article IV, if any Stockholder desires or is required to make any Transfer, ---------- before such Transfer may be made, the Company and all other Qualified Stockholders shall have the right (but not the obligation) to purchase, at the Purchase Price (as defined in Article VI) and under the terms and conditions ---------- specified herein, any and all of the Shares potentially subject to such Transfer. 2

3.02 Exercise of Rights. (a) Written Notice. The transferring Stockholder shall give written -------------- notice (for purposes of this Article III, the "Request to Transfer") to the ----------- Company and to the other Qualified Stockholders of the number of Shares subject to the proposed Transfer (the "Transfer Shares") and the proposed terms of such Transfer, including the identity of the proposed transferee and the price and other material terms, if any, of the proposed Transfer. (b) The Company's Right. The Company shall have thirty (30) days ------------------- after its receipt of a Request to Transfer under this Article III (for purposes ----------- of this Article III, the "Company's Purchase Period") during which to exercise ----------- its right to purchase, on the terms described in Article VI, the Transfer Shares ---------- or any portion thereof by giving written notice to the transferring Stockholder and the other Qualified Stockholders of the number of Transfer Shares, if any, as to which the Company is exercising its right. The Company's failure to give written notice within the Company's Purchase Period shall be deemed an election by the Company not to purchase any Transfer Shares. (c) Non-Transferring Qualified Stockholders' Rights. If and to the ----------------------------------------------- extent that the Company does not exercise its right to purchase all of the Transfer Shares, each non-transferring Qualified Stockholder shall have thirty (30) days after the expiration of the Company's Purchase Period or earlier delivery by the Company of the notice of non-purchase described in Section ------- 3.02(b) (for purposes of this Article III, the "Qualified Stockholders' Purchase ------- ----------- Period") during which to exercise such Qualified Stockholder's right to purchase, on the terms described in Article VI, some or all of such Qualified ---------- Stockholder's Pro Rata Portion (as defined below) of the Transfer Shares not being purchased by the Company by giving written notice to the Company and the other Qualified Stockholders of the number of Transfer Shares, if any, as to which such Qualified Stockholder is exercising such Qualified Stockholder's purchase right. The failure by a Qualified Stockholder to give written notice within the Qualified Stockholders' Purchase Period shall be deemed an election by the Qualified Stockholder not to purchase any of the applicable Transfer Shares. For purposes of this Section 3.02(c), a Qualified Stockholder's "Pro --------------- Rata Portion" of the Transfer Shares not being purchased by the Company shall be a portion of such Shares equal to the total number of such Shares multiplied by a fraction, the numerator of which shall be the number of Shares of the same class and series as the Transfer Shares that such Qualified Stockholder owns beneficially or is entitled to receive upon conversion or exercise of securities (whether or not vested) issued by the Company, and the denominator of which shall be the aggregate number of Shares of the same class and series as the Transfer Shares that all Qualified Stockholders other than the transferring Stockholder own beneficially or are entitled to receive upon conversion or exercise of securities (whether or not vested) issued by the Company. Following the foregoing allocation, if any Transfer Shares remain, the Qualified Stockholders who have taken their full Pro Rata Portions thereof shall have the right to purchase the balance of the unallocated Transfer Shares in proportion to their relative Pro Rata Portions immediately prior to the first allocation, and this process will continue iteratively until either all Transfer Shares have been allocated, or until no Qualified Stockholder wishes to purchase any remaining Transfer Shares. If at the time contemplated by this Section 3.02(c) --------------- there are no other Shares of the same class and series as the Transfer Shares 3

outstanding or issuable upon conversion or exercise of securities issued by the Company, the allocations contemplated by this Section 3.02(c) will be made on --------------- the basis of all Shares outstanding or underlying options or other convertible securities rather than Shares of the same class and series as the Transfer Shares. (d) Shares Not Purchased. The Stockholder proposing to make a -------------------- Transfer may Transfer any Transfer Shares not being purchased by the Company or non-transferring Qualified Stockholders at any time within one hundred twenty (120) days after the expiration of the Qualified Stockholders' Purchase Period or earlier delivery by all Qualified Stockholders of the notice of non-purchase described in Section 3.02(c); provided, however, that (i) such Transfer shall be --------------- on terms no more favorable to the transferee than the terms specified in the applicable Request to Transfer, (ii) the transferring Stockholder has obtained Majority Consent to the person or entity to which the Transfer will be made and the terms of the Transfer, which consent will not be unreasonably withheld, provided that the Stockholders may withhold consent, in their sole discretion, to any lien or encumbrance upon Shares, and (iii) the transferee shall first enter into this Agreement or otherwise agree in writing to be bound by and hold the transferred Shares or interest therein pursuant to this Agreement. (e) No Written Notice by Transferring Stockholder. If a Stockholder --------------------------------------------- purports to make a Transfer without providing a Request to Transfer, or a purported Transfer is made or required to be made pursuant to a court order, the Company's Purchase Period shall be deemed to start on the date on which the Company's President or Chief Executive Officer obtains actual and complete knowledge of the purported Transfer or order. Promptly after obtaining such knowledge, the Company shall provide written notice of such purported Transfer or order to the non-transferring Qualified Stockholders. Any such purported Transfer or order shall be subject to the rights of the Company and the other Qualified Stockholders hereunder. 3.03 Rights on Dissolution of Marriage. In the event of the dissolution of the marriage of a Stockholder (the "Divorced Stockholder") and the division of the property of the Divorced Stockholder and the Divorced Stockholder's spouse (the "Divorced Spouse"), the Divorced Spouse, by executing a Spousal Consent in substantially the form of Exhibit I to this Agreement, agrees to --------- accept other property in lieu of any interest which the Divorced Spouse may assert in any Shares or under this Agreement. In the event there is not sufficient marital or separate property to compensate the Divorced Spouse for any interest the Divorced Spouse may assert in Shares or under this Agreement, or if for any other reason there is a Transfer or award of any interest in Shares to the Divorced Spouse, such Transfer or award shall be treated as a proposed Transfer subject to Section 3.01. Any Shares retained by the Divorced ------------ Stockholder and not transferred to the Divorced Spouse shall not become subject to the purchase rights under this Agreement as a result of the divorce or any Transfer to the Divorced Stockholder of the Divorced Spouse's interest in such Shares. Stockholders shall cause their respective current and future spouses to execute and deliver to the Company a Spousal Consent in substantially the form of Exhibit I. For purposes of this Section 3.03, when Shares are owned by a --------- ------------ trust or as community or marital property or as joint tenants or tenants in common, the trustee or beneficiary or spouse who is a Qualified Stockholder or a direct lineal descendant of a Qualified Stockholder shall be 4

deemed to be the Stockholder of such Shares and the Divorced Stockholder for purposes of this Section 3.03. ------------ IV. DEATH OF A STOCKHOLDER 4.01 Rights on Death. Any Transfer or purported Transfer of Shares or interests therein owned by a deceased Stockholder (the "Decedent's Shares") shall be subject to the rights as set forth in this Article IV (but no ---------- obligation) of the Company and the Qualified Stockholders to purchase some or all of the Decedent's Shares at the Purchase Price and under the terms and conditions hereinafter specified. 4.02 Exercise of Rights. (a) Written Notice. The legal representative of a deceased -------------- Stockholder shall give written notice (for the purposes of this Article IV, the ---------- "Request to Transfer") to the Company and the Qualified Stockholders of the number of Decedent's Shares subject to a proposed Transfer (whether by testamentary disposition, the laws of descent and distribution, or otherwise) and the proposed terms of such Transfer, including the identity of the proposed transferee and the price and other material terms, if any, of the proposed transfer. (b) The Company's Right. The Company shall have ninety (90) days ------------------- after its receipt of a Request to Transfer under this Article IV (for purposes ---------- of this Article IV, the "Company's Purchase Period") during which to exercise ---------- its right to purchase, on the terms described in Article VI, the Decedent's ---------- Shares or any portion thereof by giving written notice to the Qualified Stockholders and to the legal representatives of the estate of the deceased Stockholder of the number of the Decedent's Shares, if any, as to which the Company is exercising its right. The Company may exercise its right with respect to all or any portion of the Decedent's Shares. The Company's failure to give written notice within the Company's Purchase Period shall be deemed an election by the Company not to purchase any Decedent's Shares. (c) Qualified Stockholders' Rights. If and to the extent that the ------------------------------ Company does not exercise its right to purchase all of the Decedent's Shares, each Qualified Stockholder shall have sixty (60) days after the expiration of the Company's Purchase Period or earlier delivery by the Company of the notice of non-purchase described in Section 4.02(b) (for purposes of this Article IV, --------------- ---------- the "Qualified Stockholders' Purchase Period") during which to exercise such Stockholder's right to purchase, on the terms described in Article VI, some or ---------- all of such Qualified Stockholder's Pro Rata Portion (as defined below) of the Decedent's Shares not being purchased by the Company by giving written notice to the Company, the other Qualified Stockholders and the legal representative of the estate of the deceased Stockholder of the number of such Shares, if any, as to which such Qualified Stockholder is exercising such Qualified Stockholder's purchase right. The failure by a Qualified Stockholder to give written notice within the Qualified Stockholder's Purchase Period shall be deemed an election by the Qualified Stockholder not to purchase any of the applicable Decedent's Shares. For purposes of this Section 4.02(c), a Qualified Stockholder's "Pro --------------- Rata Portion" of the Decedent's Shares not 5

being purchased by the Company shall be a portion of such Shares equal to the total number of such Shares multiplied by a fraction, the numerator of which shall be the number of Shares of the same class and series as the Decedent's Shares that such Qualified Stockholder owns beneficially or is entitled to receive upon conversion or exercise of securities (whether or not vested) issued by the Company, and the denominator of which shall be the aggregate number of Shares of the same class and series as the Decedent's Shares that all Qualified Stockholders own beneficially or are entitled to receive upon conversion or exercise of securities (whether or not vested) issued by the Company. Following the foregoing allocation, if any Decedent's Shares remain, the Qualified Stockholders who have taken their full Pro Rata Portions thereof shall have the right to purchase the balance of the unallocated Decedent's Shares in proportion to their relative Pro Rata Portions immediately prior to the first allocation, and this process will continue iteratively until either all Decedent's Shares have been allocated, or until no Qualified Stockholder wishes to purchase any remaining Decedent's Shares. If, at the time contemplated by this Section ------- 4.02(c), there are no other Shares of the same class and series as the ------- Decedent's Shares outstanding or issuable upon conversion or exercise of securities issued by the Company, the allocations contemplated by this Section ------- 4.02(c) will be made on the basis of all Shares outstanding or underlying ------- options or other convertible securities rather than Shares of the same class and series as the Transfer Shares. (d) Shares Not Purchased. Decedent's Shares not being purchased by -------------------- the Company or Qualified Stockholders may thereafter be Transferred in compliance with applicable law, provided, however, that (i) the transferor has obtained Majority Consent to the person or entity to which the Transfer will be made and the terms of the Transfer, which will not be unreasonably withheld, provided that the Stockholders may withhold consent, in their sole discretion, to any lien or encumbrance upon Shares, and (ii) the transferee shall first enter into this Agreement or otherwise agree in writing to be bound by and hold the transferred Decedent's Shares or interest therein pursuant to this Agreement. (e) No Notice. If a Transfer of Decedent's Shares is purportedly made --------- in the absence of a Request to Transfer, or a purported Transfer is made or required to be made pursuant to a court order, the Company's Purchase Period shall be deemed to start on the date on which the Company's President or Chief Executive Officer obtains actual knowledge of the purported Transfer or order. Promptly after obtaining such knowledge, the Company shall provide written notice of such purported Transfer or order to the Qualified Stockholders. Any such purported Transfer or order shall be subject to the rights of the Company and the Qualified Stockholders hereunder. (f) Legal Representatives. In the event that a legal representative ---------------------- of the estate of the deceased Stockholder has not been appointed within sixty- five (65) days after such Stockholder's death, the written notices which would otherwise be given to such legal representative shall be given to the deceased Stockholder's heirs at law. 6

V. REPURCHASE 5.01 Right of Repurchase. In the event of termination of any Stockholder's employment, directorship, consultancy, or contractual relationship with the Company or any Affiliate, voluntarily or involuntarily, for any reason whatsoever (with or without cause), including death, disability or retirement, that does not trigger Article III or Article IV hereof (a "Repurchase Event"), ----------- ---------- the Company and, in the Company's discretion, the Qualified Stockholders other than the Stockholder involved in the Repurchase Event (the "non-Affected Stockholders"), shall have the right (the "Repurchase Right") (but not the obligation) to purchase, at the Purchase Price as defined below and under the terms and conditions specified herein, any or all of the Shares owned by the Stockholder involved in the Repurchase Event (the "Affected Stockholder"), including without limitation Shares acquired by the Affected Stockholder after the Repurchase Event (the "Repurchase Shares"). The Repurchase Right may be exercised with respect to any Repurchase Shares selected by the Company or the non-Affected Qualified Stockholders in their discretion, and no Affected Stockholder will have any right to have any Repurchase Shares purchased or not purchased. 5.02 Exercise of Repurchase Right. (a) The Company's Right. The Company may exercise its right to ------------------- purchase Repurchase Shares or any portion thereof at any time within ninety (90) days after the Repurchase Event (or, if later, within ninety (90) days after receiving notice of acquisition by the Affected Stockholder of Shares following the Repurchase Event), by giving written notice to the Affected Stockholder and the non-Affected Stockholders of the Repurchase Shares as to which the Company is exercising its right. (b) Non-Affected Stockholders' Rights. The Company may from time to --------------------------------- time in its discretion (but will have no obligation to) permit non-Affected Stockholders to purchase some or all of such non-Affected Stockholders' Pro Rata Portions (as defined below) of the Repurchase Shares, or any portion thereof designated by the Company, not being purchased at that time by the Company. The Company shall exercise this right by notice to the non-Affected Stockholders, each of whom may then exercise the right to purchase Repurchase Shares by giving written notice to the Company, the Affected Stockholder, and the non-Affected Stockholders of the number of Repurchase Shares as to which such Stockholder is exercising such Stockholder's purchase right. The failure by a non-Affected Stockholder to give written notice within fifteen (15) days after receipt of the Company notice will be deemed an election by the Stockholder not to purchase any of the applicable Repurchase Shares. For purposes of this Section 5.02(b), a --------------- non-Affected Stockholder's "Pro Rata Portion" of the designated Repurchase Shares not being purchased by the Company shall be a portion of such Shares equal to the total number of such Shares multiplied by a fraction, the numerator of which shall be the number of Shares of the same class and series as the designated Repurchase Shares that such non-Affected Stockholder owns beneficially or is entitled to receive upon conversion or exercise of securities (whether or not vested) issued by the Company, and the denominator of which shall be the aggregate number of Shares of the same class and series as the designated Repurchase Shares 7

that all non-Affected Stockholders own beneficially or are entitled to receive upon conversion or exercise of securities (whether or not vested) issued by the Company. Following the foregoing allocation, if any Repurchase Shares remain, the non-Affected Stockholders who have taken their full Pro Rata Portions thereof shall have the right to purchase the balance of the unallocated Repurchase Shares in proportion to their relative Pro Rata Portions immediately prior to the first allocation, and this process will continue iteratively until either all Repurchase Shares have been allocated, or until no non-Affected Stockholder wishes to purchase any remaining Repurchase Shares. If, at the time contemplated by this Section 5.02(b), there are no other Shares of the same --------------- class and series as the designated Repurchase Shares outstanding or issuable upon conversion or exercise of securities issued by the Company, the allocations contemplated by this Section 5.02(b) will be made on the basis of all Shares --------------- outstanding or underlying options or other convertible securities rather than Shares of the same class and series as the Repurchase Shares. VI. PURCHASE PRICE AND PAYMENT 6.01 Initial Purchase Price. The "Purchase Price" applicable to the purchase by the Company or any Qualified Stockholder of any Shares pursuant to this Agreement shall be the lesser of (a) the proposed sale price specified in the Request to Transfer, if applicable, and (b) $___________ per Share (which is agreed to be a fair estimate of the fair market value of the Company's stock as of the date hereof), subject to adjustment as provided in Section 6.02 (the ------------ "Agreed Price"), but in no event will the Purchase Price be less than the minimum price, if any, required under the applicable law. Notwithstanding the foregoing, however, the Company or any Stockholder may in its discretion (but shall have no obligation to) pay any such higher price for any Shares pursuant to this Agreement as the Company or such Stockholder may determine, provided that such a discretionary higher price paid by the Company or any Stockholder for certain Shares shall not create any obligation upon the Company or any Stockholder to pay any discretionary higher price for any other Shares. 6.02 Adjusted Purchase Price. During the ninety (90) day period immediately preceding the commencement of each calendar year commencing with the ninety (90) day period prior to calendar year 1999 (the "Pricing Period" for the ensuing year) the Company and the Stockholders acting by Special Consent shall agree in writing upon the Agreed Price (which shall be a good faith estimate of the fair market value of the Company's stock) relevant to any Transfer that might occur during such immediately following calendar year. If for any reason the Company and the Stockholders do not fix the Agreed Price as aforesaid or cannot agree on the Agreed Price for any calendar year, the Agreed Price for such calendar year shall be the then fair market value of the Shares as of the last day of the Pricing Period for that calendar year, to be determined by an independent appraiser selected by the Stockholders acting by Majority Consent. The Stockholders acting by Special Consent may cause the Agreed Price applicable to a particular calendar year to be adjusted not more than twice during that calendar year to a price (which shall be a good faith estimate of the fair market value of the Company's stock) agreed upon in writing by the Stockholders acting by Special Consent, and if the Stockholders cannot reach such agreement by Special Consent, then a price representing the fair market value of the 8

Shares at such time as determined by an independent appraiser selected by the Stockholders acting by Majority Consent. 6.03 Payment of Purchase Price. The Purchase Price shall be paid by delivering to the transferring Stockholder, or the legal representative of such Stockholder, a bank certified or cashier's check or checks at a "Closing" to be held within ten (10) days of final determination of the number of Shares that will be purchased by the Company and any Qualified Stockholders pursuant to their purchase rights under this Agreement and the price payable therefor. At the Closing, the transferring Stockholder, or the Stockholder's legal representative, shall deliver to the Company and/or the Qualified Stockholders purchasing the Shares, as applicable, (individually a "Purchaser" and collectively the "Purchasers") the certificate or certificates representing the Shares to be purchased, duly endorsed or accompanied by duly executed stock powers for transfer to the Purchasers. If there is more than one Purchaser, the certificate or certificates shall be delivered to the Company and the Company shall reissue certificates representing the Shares to the Purchasers as appropriate. Delivery of the Shares to the Purchasers shall constitute the representation and warranty of the transferring Stockholder to the Purchasers that the Shares being purchased are delivered free and clear of all claims, encumbrances, or other rights or interests of third parties, including without limitation community property rights of spouses or former spouses (other than liens created in compliance with this Agreement and fully disclosed), and that the Purchasers shall obtain good and marketable title to the Shares (subject to this Agreement). All parties to a purchase of Shares under this Agreement shall promptly execute and file all agreements, documents, applications, and instruments and shall take such additional actions required by applicable securities and other laws, rules, or regulations to effect the sales of the Shares pursuant hereto. 6.04 Failure to Deliver Company Option Shares. If any Stockholder obligated to transfer Shares hereunder fails or refuses to deliver on a timely basis duly endorsed certificates representing the Shares to be sold to the Company or Qualified Stockholders, the Company or the purchasing Qualified Stockholders will have the right to deposit the Purchase Price for such Shares in a special account with any bank or trust company in the State of California, giving notice of such deposit to the Stockholder obligated to sell, whereupon such Shares will be deemed to have been purchased by the Company or Qualified Stockholders. All such moneys, less any fees and expenses charged by the bank or trust company, will be held by the bank or trust company for the benefit of the selling Stockholder. All moneys deposited with the bank or trust company remaining unclaimed for six (6) years after the date of deposit must be repaid by the bank or trust company to the Company on demand, and the selling Stockholder may thereafter look only to the Company for payment. VII. GENERAL PROVISIONS 7.01 Equity Securities. In the event the Company issues equity securities other than common stock, or securities exercisable or convertible for common stock or other equity securities, this Agreement shall be deemed to apply to such securities in the same manner as to common stock, with such equity securities weighted as equitable and appropriate hereunder, 9

according to their relative voting rights and/or liquidation or other preferential rights vis-a-vis common stock or the number of shares of common stock ultimately issuable upon their exercise or conversion. 7.02 Non-Employee Stockholders. Notwithstanding anything herein to the contrary, no Stockholder who is not a Qualified Stockholder will have any right to purchase Shares hereunder. 7.03 Transferees. Any person or entity acquiring Shares or any interest therein pursuant to this Agreement shall take the same subject to the terms of this Agreement, shall be a Stockholder for purposes of this Agreement and may not make any Transfer except as provided in this Agreement. 7.04 Adoptees. Adopted children shall be treated the same as biological children for purposes of determining direct lineal descendancy hereunder. 7.05 Equitable Remedies. The parties to this Agreement recognize and agree that the Shares subject to this Agreement are of a peculiar and unique character, and that this Agreement may be enforced by an injunction or injunctions to prevent Transfers or other dispositions of the Shares not in accordance with the terms of this Agreement or by a decree for specific performance of the provisions of this Agreement. 7.06 Authorization of Directors. Subject to the provisions of this Agreement, the Board of Directors of the Company shall have full authority to prescribe regulations and conditions not inconsistent with this Agreement for the exercise of rights to purchase Shares hereunder, the consummation of purchases and sales thereunder, and any and all other matters necessary and convenient for the performance of this Agreement. 7.07 Copy For Inspection. A copy of this Agreement shall be filed in the principal office of the Company and shall be made available to Stockholders upon request. 7.08 Notices. All written notices referred to in this Agreement shall be communicated by means of registered or certified mail (return receipt requested) or personal delivery and shall be effective for purposes of determining compliance with the time requirements herein (unless otherwise specifically provided herein) at the time of personal delivery, or upon deposit in the United States mail, postage fully prepaid, addressed, if to the Company, at its then principal place of business, if to a Stockholder, at the latest address of such Stockholder shown on the books of the Company, or if to the legal representative of a deceased Stockholder or to such deceased Stockholder's heirs at law, at the latest address of such deceased Stockholder shown on the books of the Company. Any such notice shall be conclusively deemed to have been received by the addressee for purposes hereof when tendered at the address to which it is so addressed. 7.09 Legal Holidays. In the event that any period of time specified in this Agreement ends on a Saturday or Sunday or a legal holiday, as defined under the present or any future laws of the State of California, then such period shall be construed to include the next succeeding business day. 10

7.10 Successors and Assigns. This Agreement shall be binding upon the successors, heirs, executors, administrators and assigns of the parties hereto. In the event that any security subject to this Agreement or any right hereunder shall be determined to be community property under the laws of California or any other state or country, this Agreement shall bind the community interest of the spouse, and such spouse's heirs, executors, administrators and assigns, as well as the interest of the party in whose name the security is registered. 7.11 Amendment. This Agreement may be amended only with the consent of the Qualified Stockholders owning outstanding voting securities of the Company representing more than 50% of the total voting interest represented by all outstanding voting securities of the Company owned by Qualified Stockholders. 7.12 Termination of Agreement. This Agreement shall terminate upon: (a) the vote of the Stockholders acting by Special Consent, (b) the dissolution of the Company, (c) the concurrent death of all of the Stockholders, (d) the merger or other acquisition of the Company in a transaction in which the Company is not the survivor and the Stockholders do not own more than 50% of the voting securities or securities convertible or exercisable for voting securities of the survivor of the merger, or (e) the consummation of an underwritten public offering of common stock of the Company having gross proceeds of at least $10 million and a price per share or other unit to the public of at least $5.00. 7.13 Attorneys' Fees and Costs. If any party to this Agreement brings any action or proceeding, at law or equity, to enforce this Agreement or on account of any breach of this Agreement, the prevailing party or parties shall be entitled to recover from the non-prevailing party or parties the reasonable attorneys' fees and costs of the prevailing party or parties incurred in such action. If there is more than one non-prevailing party in such action, the non- prevailing parties shall each be liable only for the portion of the attorneys' fees and costs of the prevailing party or parties as the court or arbitration determines are fairly allocable to such non-prevailing party in light of all of the facts and circumstances, including relative fault among all non-prevailing parties, provided that all attorneys' fees and costs of the prevailing party or parties will be allocated. 7.14 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument. 7.15 Entire Agreement. This Agreement together with the Plan and the Stock Option Agreement by and between the Stockholder and the Company, supersede all prior written and oral understandings, commitments and agreements between the Stockholder, on the one hand, and the Company and/or its subsidiaries, on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between the parties hereto with respect to the subject matter of this Agreement. 11

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. BROADBAND SPORTS, INC. By:________________________________________ Name:______________________________________ Title:_____________________________________ By:________________________________________ [NAME] 12

EXHIBIT I TO STOCKHOLDER AGREEMENT SPOUSAL CONSENT CONSENT TO STOCKHOLDER AGREEMENT OF BROADBAND SPORTS, INC. The undersigned is the spouse of _______________ and acknowledges that he or she has read the Stockholder Agreement among Broadband Sports, Inc., a Delaware corporation (the "Company"), and its stockholders (the "Agreement") and clearly understands its provisions. The undersigned is aware that, by the provisions of the Agreement, the undersigned and his or her spouse have agreed to subject all their interest in the Company, including any community property, joint tenancy, or tenancy in common interest, to the terms of the Agreement, including provisions of the Agreement that restrict their ability to sell or transfer their interest in the Company. The undersigned understands and agrees that the Agreement provides that upon dissolution of marriage the undersigned will not be entitled to any interest in the Company, and must take other property in lieu of any such interest. The undersigned hereby expressly approves of and agrees to be bound by the provisions of the Agreement in its entirety, including without limitation those provisions relating to sales and transfers of interests in the Company and limitations on inheritance at death. If the undersigned predeceases his or her spouse when his or her spouse owns an interest in the Company, he or she hereby agrees not to devise or bequeath any interest he or she may have in the Company in contravention of the Agreement. Date:____________________________ _________________________________ (Signature of spouse) _________________________________ (Printed name of spouse)

EXHIBIT B to BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN NOTICE OF EXERCISE Broadband Sports, Inc. Re: Stock Option Notice is hereby given that I elect to purchase the number of shares (the "Shares") set forth below pursuant to the stock option referenced below at the exercise price applicable thereto: Option Grant Date: _______________ Vesting Commencement Date: _______________ Total Number of Shares Underlying Original Option: _______________ Number of Shares for which Option has been Previously Exercised: _______________ Exercise Price Per Share: _______________ Number of Shares Being Acquired With This Exercise: _______________ A check in the amount of the aggregate price of the shares being purchased is attached. I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. I will not sell or dispose of my Shares in violation of the Securities Act of 1933, as amended, or any applicable federal or state securities laws. Further, I understand that the exemption from taxable income at the time of exercise is dependent upon my holding such stock for a period of at least one year from the date of exercise and two years from the date of grant of the Option. I understand that the certificate representing the Shares will bear a restrictive legend within the contemplation of the Securities Act and as required by such other state or federal law or regulation applicable to the issuance or delivery of the Shares. I agree to provide to the Company such additional documents or information as may be required pursuant to the Company's 1998 Equity Incentive Plan. ________________________________ (signature) ________________________________ (name of Optionee)

BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement") is made effective as of the Option Grant Date set forth below, by and between Broadband Sports, Inc., a Delaware corporation (the "Company"), and _________________________ ("Optionee"). Terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the Broadband Sports, Inc. 1998 Equity Incentive Plan (the "Plan"). The parties agree as follows: 1. Governing Plan. Optionee has received a copy of the Plan. This -------------- Agreement is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control. 2. Grant of Option. The Company hereby grants to Optionee a stock option --------------- (the "Option") to purchase shares of the Company's Common Stock upon the following terms and conditions: <TABLE> --------------------------------------------------------------------------------------------------------------------- <S> <C> Option Grant Date: Vesting Commencement Date: Type of Option (Incentive/Nonqualified): Maximum Number of Shares of Common Stock Issuable Upon Exercise of Option: ____________________ Purchase Price Per Share: $___________________ Vesting Schedule: The Option to purchase the option shares will vest with respect to 1/4th of the option shares on the first anniversary of the Vesting Commencement Date and with respect to 1/16th of the option shares on each quarterly (3 month) anniversary of the Vesting Commencement Date thereafter. Expiration Date: ____________________ --------------------------------------------------------------------------------------------------------------------- </TABLE> 3. Governing Law. This Agreement shall be governed by, interpreted under, ------------- and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of Delaware. 4. Entire Agreement. This Agreement together with the document(s) ---------------- referred to herein supersede all prior written and oral commitments, understandings and agreements between Optionee, on the one hand, and the Company and/or its subsidiaries, on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between the Optionee and the Company with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by Optionee and the Company.

5. No Representations; Reverse Stock Splits. The Company does not make, ---------------------------------------- nor has it authorized anyone to make on its behalf, any representations or warranties as to the value of the Option or the Common Stock underlying the Option today or in the future. Optionee understands and acknowledges that both the Option and the underlying Common Stock may have no value. Optionee understands and acknowledges that in the event the Company makes available its capital stock, including without limitation its Common Stock, in a public offering or a private placement, it is likely that the Company's outstanding securities, including without limitation its Common Stock underlying the Option, will be subject to a reverse split by a factor of fifteen (15) or more. IN WITNESS WHEREOF, the Company and Optionee have executed this Stock Option Agreement effective as of the Option Grant Date. The Company: Optionee: BROADBAND SPORTS, INC. By:______________________________ __________________________________ Name:____________________________ [NAME] Title:___________________________ 2

BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT FOR INCENTIVE STOCK OPTIONS Athlete Direct, Inc. THIS STOCK OPTION AGREEMENT (this "Agreement") is made effective as of the Option Grant Date set forth below, by and between Broadband Sports, Inc., a Delaware corporation (the "Company"), and _________________________ ("Optionee"). This Option is being granted to Optionee to encourage and reward his or her contributions to the performance of Athlete Direct, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Athlete Direct"). Terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the Broadband Sports, Inc. 1998 Equity Incentive Plan (the "Plan"). The parties agree as follows: 1. Governing Plan. Optionee has received a copy of the Plan. This -------------- Agreement is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control. 2. Grant of Option. The Company hereby grants to Optionee a stock option --------------- (the "Option") to purchase shares of the Company's Common Stock upon the following terms and conditions: <TABLE> --------------------------------------------------------------------------------------------------------------------- <S> <C> Option Grant Date: Vesting Commencement Date: Type of Option: Incentive Maximum Number of Shares of Common Stock Issuable Upon Exercise of Option: ____________________ Purchase Price Per Share: $___________________ Vesting Schedule: The Option to purchase the option shares will vest with respect to 1/4th of the option shares on the first anniversary of the Vesting Commencement Date and with respect to 1/16th of the option shares on each quarterly (3 month) anniversary of the Vesting Commencement Date thereafter. Expiration Date: ____________________ --------------------------------------------------------------------------------------------------------------------- </TABLE> 3. Consent to Adjustment of Option. Optionee acknowledges that this ------------------------------- Option has been granted in connection with Optionee's expected contributions to Athlete Direct and therefore agrees that if the Company consummates any transaction (a "Sale Transaction") involving the transfer of all or substantially all of the assets or capital stock of Athlete Direct (whether by sale, merger, exchange, consolidation or any other manner) to a third-party (the "Transferee") without transferring all or substantially all of the assets or capital stock of the Company, the Company shall have the right, but not the obligation, to adjust, exchange or convert Optionee's Option into an option (of equivalent value as determined in good faith by the Administrator) to acquire shares of Athlete Direct or the Transferee.

4. Governing Law. This Agreement shall be governed by, interpreted under, ------------- and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of Delaware. 5. Entire Agreement. This Agreement together with the document(s) ---------------- referred to herein supersede all prior written and oral commitments, understandings and agreements between Optionee, on the one hand, and the Company and/or its subsidiaries (including without limitation Athlete Direct), on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between the Optionee and the Company with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by Optionee and the Company. 6. No Representations; Reverse Stock Splits. The Company does not make, ---------------------------------------- nor has it authorized anyone to make on its behalf, any representations or warranties as to the value of the Option or the Common Stock underlying the Option today or in the future. Optionee understands and acknowledges that both the Option and the underlying Common Stock may have no value. Optionee understands and acknowledges that in the event the Company makes available its capital stock, including without limitation its Common Stock, in a public offering or a private placement, it is likely that the Company's outstanding securities, including without limitation its Common Stock underlying the Option, will be subject to a reverse split by a factor of fifteen (15) or more. IN WITNESS WHEREOF, the Company and Optionee have executed this Stock Option Agreement effective as of the Option Grant Date. The Company: Optionee: BROADBAND SPORTS, INC. By:________________________________ __________________________________ Name:______________________________ [NAME] Title:_____________________________ 2

BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT FOR NON-QUALIFIED STOCK OPTIONS Athlete Direct, Inc. THIS STOCK OPTION AGREEMENT (this "Agreement") is made effective as of the Option Grant Date set forth below, by and between Broadband Sports, Inc., a Delaware corporation (the "Company"), and _________________________ ("Optionee"). This Option is being granted to Optionee to encourage and reward his or her contributions to the performance of Athlete Direct, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Athlete Direct"), pursuant to that certain Agreement dated __________________ by and between and Optionee and Athlete Direct (the "Athlete Agreement"). Terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the Broadband Sports, Inc. 1998 Equity Incentive Plan (the "Plan"). The parties agree as follows: 1. Governing Plan. Optionee has received a copy of the Plan. This -------------- Agreement is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control. 2. Grant of Option. The Company hereby grants to Optionee a stock option --------------- (the "Option") to purchase shares of the Company's Common Stock upon the following terms and conditions: <TABLE> --------------------------------------------------------------------------------------------------------------------- <S> <C> Option Grant Date: Vesting Commencement Date: Type of Option: Nonqualified Maximum Number of Shares of Common Stock Issuable Upon Exercise of Option: ____________________ Purchase Price Per Share: $___________________ Vesting Schedule: The Option to purchase the option shares will vest at a rate of _____% per year beginning on the first anniversary of the Vesting Commencement Date. The Option shall only be exercisable with respect to vested option shares upon the earlier of (i) the merger or other acquisition of the Company in a transaction in which the Company is not the survivor and the stockholders of the Company immediately prior to such merger or other acquisition do not own more than 50% of the voting securities or securities convertible or exercisable for voting securities of the survivor of the merger, (ii) the consummation of an underwritten public offering of common stock of the Company having gross proceeds of at least $10 million and a price per share or other unit to the public of at least $5.00 or (iii) the third anniversary of the Vesting Commencement Date. --------------------------------------------------------------------------------------------------------------------- </TABLE>

<TABLE> <S> <C> ---------------------------------------------------------------------------------------------------- Expiration Date: ____________________ ---------------------------------------------------------------------------------------------------- </TABLE> 3. Consent to Adjustment of Option. Optionee acknowledges that this ------------------------------- Option has been granted in connection with Optionee's expected contributions to Athlete Direct and therefore agrees that if the Company consummates any transaction (a "Sale Transaction") involving the transfer of all or substantially all of the assets or capital stock of Athlete Direct (whether by sale, merger, exchange, consolidation or any other manner) to a third-party (the "Transferee") without transferring all or substantially all of the assets or capital stock of the Company, the Company shall have the right, but not the obligation, to adjust, exchange or convert Optionee's Option into an option (of equivalent value as determined in good faith by the Administrator) to acquire shares of Athlete Direct or the Transferee. 4. Governing Law. This Agreement shall be governed by, interpreted under, ------------- and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of Delaware. 5. Entire Agreement. This Agreement together with the document(s) ---------------- referred to herein supersede all prior written and oral commitments, understandings and agreements (including without limitation the Athlete Agreement) between Optionee, on the one hand, and the Company and/or its subsidiaries (including without limitation Athlete Direct), on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between the Optionee and the Company with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by Optionee and the Company. 6. No Representations; Reverse Stock Splits. The Company does not make, ---------------------------------------- nor has it authorized anyone to make on its behalf, any representations or warranties as to the value of the Option or the Common Stock underlying the Option today or in the future. Optionee understands and acknowledges that both the Option and the underlying Common Stock may have no value. Optionee understands and acknowledges that in the event the Company makes available its capital stock, including without limitation its Common Stock, in a public offering or a private placement, it is likely that the Company's outstanding securities, including without limitation its Common Stock underlying the Option, will be subject to a reverse split by a factor of fifteen (15) or more. IN WITNESS WHEREOF, the Company and Optionee have executed this Stock Option Agreement effective as of the Option Grant Date. The Company: Optionee: BROADBAND SPORTS, INC. By:____________________________ ________________________________ Name:__________________________ [NAME] Title:_________________________ 2

BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT FOR INCENTIVE STOCK OPTIONS Pro Sports Xchange, Inc. THIS STOCK OPTION AGREEMENT (this "Agreement") is made effective as of the Option Grant Date set forth below, by and between Broadband Sports, Inc., a Delaware corporation (the "Company"), and _________________________ ("Optionee"). This Option is being granted to Optionee to encourage and reward his or her contributions to the performance of Pro Sports Xchange, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("PSX"). Terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the Broadband Sports, Inc. 1998 Equity Incentive Plan (the "Plan"). The parties agree as follows: 1. Governing Plan. Optionee has received a copy of the Plan. This -------------- Agreement is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control. 2. Grant of Option. The Company hereby grants to Optionee a stock option --------------- (the "Option") to purchase shares of the Company's Common Stock upon the following terms and conditions: <TABLE> --------------------------------------------------------------------------------------------------------------------- <S> <C> Option Grant Date: Vesting Commencement Date: Type of Option: Incentive Maximum Number of Shares of Common Stock Issuable Upon Exercise of Option: ____________________ Purchase Price Per Share: $___________________ Vesting Schedule: The Option to purchase the option shares will vest with respect to 1/4th of the option shares on the first anniversary of the Vesting Commencement Date and with respect to 1/16th of the option shares on each quarterly (3 month) anniversary of the Vesting Commencement Date thereafter. Expiration Date: ____________________ --------------------------------------------------------------------------------------------------------------------- </TABLE> 3. Consent to Adjustment of Option. Optionee acknowledges that this ------------------------------- Option has been granted in connection with Optionee's expected contributions to PSX and therefore agrees that if the Company consummates any transaction (a "Sale Transaction") involving the transfer of all or substantially all of the assets or capital stock of PSX (whether by sale, merger, exchange, consolidation or any other manner) to a third-party (the "Transferee") without transferring all or substantially all of the assets or capital stock of the Company, the Company shall have the right, but not the obligation, to adjust, exchange or convert Optionee's Option into an option (of equivalent value as determined in good faith by the Administrator) to acquire shares of PSX or the Transferee.

4. Governing Law. This Agreement shall be governed by, interpreted under, ------------- and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of Delaware. 5. Entire Agreement. This Agreement together with the documents(s) ---------------- referred to herein supersede all prior written and oral commitments, understandings and agreements between Optionee, on the one hand, and the Company and/or its subsidiaries (including without limitation PSX), on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between the Optionee and the Company with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by Optionee and the Company. 6. No Representations; Reverse Stock Splits. The Company does not make, ---------------------------------------- nor has it authorized anyone to make on its behalf, any representations or warranties as to the value of the Option or the Common Stock underlying the Option today or in the future. Optionee understands and acknowledges that both the Option and the underlying Common Stock may have no value. Optionee understands and acknowledges that in the event the Company makes available its capital stock, including without limitation its Common Stock, in a public offering or a private placement, it is likely that the Company's outstanding securities, including without limitation its Common Stock underlying the Option, will be subject to a reverse split by a factor of fifteen (15) or more. IN WITNESS WHEREOF, the Company and Optionee have executed this Stock Option Agreement effective as of the Option Grant Date. The Company: Optionee: BROADBAND SPORTS, INC. By:_____________________________ ________________________________ Name:___________________________ [NAME] Title:__________________________ Title:__________________________ 2

BROADBAND SPORTS, INC. 1998 EQUITY INCENTIVE PLAN STOCK OPTION AGREEMENT FOR NON-QUALIFIED STOCK OPTIONS Pro Sports Xchange, Inc. THIS STOCK OPTION AGREEMENT (this "Agreement") is made effective as of the Option Grant Date set forth below, by and between Broadband Sports, Inc., a Delaware corporation (the "Company"), and _________________________ ("Optionee"). This Option is being granted to Optionee to encourage and reward his or her contributions to the performance of Pro Sports Xchange, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("PSX"). Terms not otherwise defined in this Agreement shall have the meanings ascribed to them in the Broadband Sports, Inc. 1998 Equity Incentive Plan (the "Plan"). The parties agree as follows: 1. Governing Plan. Optionee has received a copy of the Plan. This -------------- Agreement is subject in all respects to the applicable provisions of the Plan, which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall control. 2. Grant of Option. The Company hereby grants to Optionee a stock option --------------- (the "Option") to purchase shares of the Company's Common Stock upon the following terms and conditions: <TABLE> --------------------------------------------------------------------------------------------------------------------- <S> <C> Option Grant Date: Vesting Commencement Date: Type of Option: Nonqualified Maximum Number of Shares of Common Stock Issuable Upon Exercise of Option: ____________________ Purchase Price Per Share: $___________________ Vesting Schedule: The Option to purchase the option shares will vest at a rate of _____% per year beginning on the first anniversary of the Vesting Commencement Date. The Option shall only be exercisable with respect to vested option shares upon the earlier of (i) the merger or other acquisition of the Company in a transaction in which the Company is not the survivor and the stockholders of the Company immediately prior to such merger or other acquisition do not own more than 50% of the voting securities or securities convertible or exercisable for voting securities of the survivor of the merger, (ii) the consummation of an underwritten public offering of common stock of the Company having gross proceeds of at least $10 million and a price per share or other unit to the public of at least $5.00 or (iii) the third anniversary of the Vesting Commencement Date. Expiration Date: ____________________ --------------------------------------------------------------------------------------------------------------------- </TABLE>

3. Consent to Adjustment of Option. Optionee acknowledges that this ------------------------------- Option has been granted in connection with Optionee's expected contributions to PSX and therefore agrees that if the Company consummates any transaction (a "Sale Transaction") involving the transfer of all or substantially all of the assets or capital stock of PSX (whether by sale, merger, exchange, consolidation or any other manner) to a third-party (the "Transferee") without transferring all or substantially all of the assets or capital stock of the Company, the Company shall have the right, but not the obligation, to adjust, exchange or convert Optionee's Option into an option (of equivalent value as determined in good faith by the Administrator) to acquire shares of PSX or the Transferee. 4. Governing Law. This Agreement shall be governed by, interpreted under, ------------- and construed and enforced in accordance with the internal laws, and not the laws pertaining to conflicts or choice of laws, of the State of Delaware. 5. Entire Agreement. This Agreement together with the document(s) ---------------- referred to herein supersede all prior written and oral commitments, understandings and agreements between Optionee, on the one hand, and the Company and/or its subsidiaries (including without limitation PSX), on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between the Optionee and the Company with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by Optionee and the Company. 6. No Representations; Reverse Stock Splits. The Company does not make, ---------------------------------------- nor has it authorized anyone to make on its behalf, any representations or warranties as to the value of the Option or the Common Stock underlying the Option today or in the future. Optionee understands and acknowledges that both the Option and the underlying Common Stock may have no value. Optionee understands and acknowledges that in the event the Company makes available its capital stock, including without limitation its Common Stock, in a public offering or a private placement, it is likely that the Company's outstanding securities, including without limitation its Common Stock underlying the Option, will be subject to a reverse split by a factor of fifteen (15) or more. IN WITNESS WHEREOF, the Company and Optionee have executed this Stock Option Agreement effective as of the Option Grant Date. The Company: Optionee: BROADBAND SPORTS, INC. By:_____________________________ _________________________________ Name:___________________________ [NAME] Title:__________________________ 2

BROADBAND SPORTS, INC. RESTRICTED STOCK GRANT Date: ____________________ To: ____________________ ____________________ ____________________ Dear ____________________: The Board of Directors of Broadband Sports, Inc., a Delaware corporation (the "Company"), has elected to grant to ____________________ ("you") an award of restricted stock on the terms and conditions set forth below: 1. Grant of Restricted Stock. The Company hereby grants to you ------------------------- ______________ _____________________ (________) shares of the Company's common stock (the "Granted Stock"), subject to the terms, conditions and restrictions set forth below (this "Restricted Stock Grant"). Simultaneous to your execution and delivery of this Restricted Stock Grant to the Company, you shall pay to the Company $__________ for each share of the Granted Stock that you acquire pursuant to this Restricted Stock Grant (the "Acquisition Consideration") and to enter into a stockholder agreement in the form specified by the Company (the "Stockholder Agreement"). 2. Restrictions on the Granted Stock. Any Granted Stock acquired by you --------------------------------- will be subject to the following restrictions: (a) No Transfer. The shares of Granted Stock may not be sold, ----------- assigned, transferred, pledged, hypothecated or otherwise disposed of, alienated or encumbered until the restrictions set forth in Section 2(b) ------------ are removed or expire as provided in Section 2(c), and any additional ------------ requirements or restrictions contained in this Restricted Stock Grant have been satisfied, terminated or expressly waived by the Company in writing. Further, any such transfer may only be made in compliance with the Stockholder Agreement. (b) Restrictions. Notwithstanding the Stockholder Agreement, in the ------------ event your service as a _______________________ of the Company terminates for any reason, the Company will have the right, which must be exercised not later than ninety (90) days following such termination, to buy, for cash and at the price per share that you paid to the Company, all shares of Granted Stock acquired hereunder that are, at the date of such termination, still subject to the vesting restrictions imposed under this Section. Shares no longer subject to such vesting restrictions will be governed by the Stockholder Agreement.

(c) Removal of Restrictions. The restrictions imposed under the ----------------------- foregoing provisions of this Section will expire and be removed, and the shares of Granted Stock acquired by you under this Restricted Stock Grant will vest, in accordance with the following rules: (i) The restrictions imposed under Section 2(b) above will lapse ------------ and be removed at the rate of (A) 1/4th of the shares of Granted Stock on the first anniversary of this Restricted Stock Grant; and (B) 1/12th of the shares of Granted Stock on the first day of each quarter (3 month period) thereafter (the "Vesting Schedule"). (ii) In the event that your service as a ____________________ of the Company terminates for any reason before you are fully vested in the Granted Stock, the restrictions imposed under Section 2(b) will ------------ expire and be removed if the Company does not elect to repurchase the Granted Stock within ninety (90) days of such termination, but the Granted Shares will remain subject to the Stockholder Agreement. 3. Voting and Other Rights. Notwithstanding anything to the contrary in ----------------------- the foregoing, during the period prior to the lapse and removal of the restrictions set forth in Section 2, except as otherwise provided herein, you --------- will have all of the rights of a stockholder with respect to all of the Granted Stock you purchase, including without limitation the right to vote such Granted Stock and the right to receive all dividends or other distributions with respect to such Granted Stock. In connection with the payment of such dividends or other distributions, the Company will be entitled to deduct any taxes or other amounts required by any governmental authority to be withheld and paid over to such authority for your account. 4. Expiration of Restrictions. As soon as practicable after the lapse and -------------------------- removal of the restrictions applicable to all or any portion of the Granted Stock as provided in Section 2, the Company will release the certificate(s) --------- representing such Granted Stock to you, provided that (a) you have paid to the Company, by cash or check, the Acquisition Consideration and an amount sufficient to satisfy any taxes or other amounts required by any governmental authority to be withheld and paid over to such authority for your account, or otherwise made arrangements satisfactory to the Company for the payment of such amounts through withholding or otherwise, and (b) you have, if requested by the Company, made appropriate representations in a form satisfactory to the Company that such Granted Stock will not be sold other than (i) pursuant to an effective registration statement under the Securities Act of 1933, as amended, or an applicable exemption from the registration requirements of such Act; (ii) in compliance with all applicable state securities laws and regulations; and (iii) in compliance with all terms and conditions of the Plan and the Stockholder Agreement to which you are party. 5. Section 83(b) Election. You will be entitled to make an election ---------------------- pursuant to Section 83(b) of the Internal Revenue Code, or comparable provisions of any state tax law, to include in your gross income the amount by which the fair market value of the Granted Stock you acquire exceeds the Acquisition Consideration only if, prior to making any such election, you (a) notify the Company of your intention to make such election, by delivering to the Company a copy of the fully-executed Section 83(b) Election Form attached hereto as Exhibit A, --------- 2

and (b) pay to the Company an amount sufficient to satisfy any taxes or other amounts required by any governmental authority to be withheld or paid over to such authority for your account, or otherwise makes arrangements satisfactory to the Company for the payment of such amounts through withholding or otherwise. 6. Merger, Consolidation or Reorganization. In the event of a merger, --------------------------------------- consolidation or reorganization of the Company in which the Common Stock of the Company is exchanged for cash, securities or other property (the "Exchange Consideration"), you will be entitled to receive a proportionate share of the Exchange Consideration in exchange for your Granted Stock; provided, however, that your share of the Exchange Consideration shall be subject to the vesting restrictions imposed under Section 2, unless the Board of Directors, in its --------- discretion, accelerates the Vesting Schedule. 7. No Right to Continued Employment. This Restricted Stock Grant does not -------------------------------- confer upon you any right to continue as an employee of the Company, nor does it limit in any way the right of the Company to terminate your services to the Company at any time, with or without cause. 8. No Representations; Reverse Stock Splits. The Company does not make, ---------------------------------------- nor has it authorized anyone to make on its behalf, any representations or warranties as to the value of the Option or the Common Stock underlying the Option today or in the future. Optionee understands and acknowledges that both the Option and the underlying Common Stock may have no value. Optionee understands and acknowledges that in the event the Company makes available its capital stock, including without limitation its Common Stock, in a public offering or a private placement, it is likely that the Company's outstanding securities, including without limitation its Common Stock underlying the Option, will be subject to a reverse split, perhaps by a factor of ten (10) or more. 9. No Assignment. Neither this Restricted Stock Grant nor any rights ------------- granted herein are assignable by you. 10. Notices. All notices or other communications required or permitted ------- hereunder will be in writing, and will be sufficient in all respects only if delivered in person or sent via certified mail, postage prepaid, delivered as follows: If to the Company: Broadband Sports, Inc. ______________________________ ______________________________ If to you: ______________________________ ______________________________ ______________________________ 11. Governing Law. This Restricted Stock Grant will be governed by and ------------- construed in accordance with the laws of the State of Delaware. 12. Governing Plan. This Restricted Stock Grant is subject in all -------------- respects to the applicable provisions of the Company's 1998 Equity Incentive Plan (the "Plan"), which are incorporated herein by reference. In the case of any conflict between the provisions of the Plan 3

and this Restricted Stock Grant, the provisions of the Plan shall control. Terms not otherwise defined in this Restricted Stock Grant shall have the meanings ascribed to them in the Plan. 13. Entire Agreement. This Restricted Stock Grant together with the ---------------- document(s) referred to herein supersede all prior written and oral commitments, understandings and agreements (including without limitation that certain Agreement dated _________ by and between and you and [__________]) between you, on the one hand, and the Company and/or its subsidiaries, on the other hand, with respect to the subject matter of this Agreement, and constitute a complete and exclusive statement of the terms of the agreement between you and the Company with respect to the subject matter of this Agreement. This Agreement may not be amended except by a written agreement executed by you and the Company. BROADBAND SPORTS, INC. By:_____________________________________ Name:___________________________________ Its:____________________________________ By:_____________________________________ [NAME] 4

EXHIBIT A to Restricted Stock Grant ELECTION TO INCLUDE VALUE OF RESTRICTED PROPERTY IN GROSS INCOME IN YEAR OF TRANSFER INTERNAL REVENUE CODE (S) 83(b) The undersigned hereby elects pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below, and supplies the following information in accordance with the regulations promulgated thereunder: 1. Name, address and taxpayer identification number of the undersigned: ___________________________________ ___________________________________ ___________________________________ Taxpayer I.D. No.:_________________ 2. Description of property with respect to which the election is being made: ____________ shares of Common Stock of Broadband Sports, Inc., a Delaware corporation (the "Company") 3. Date on which property was transferred: 4. Taxable year to which this election relates: 5. Nature of the restrictions to which the property is subject: If the taxpayer's service as a ______________ of the Company terminates for any reason before the Common Stock vests, the Company will have the right to repurchase the Common Stock from the taxpayer at $_______ per share. The Common Stock vests according to the following schedule: _________________________________________________________________________ The Common Stock is non-transferable in the taxpayer's hands, by virtue of language to that effect stamped on the stock certificate. 6. Fair market value of the property: The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions that by their terms will never lapse) of the property with respect to which this election is being made is $_________ per share. 7. Amount paid for the property: The amount paid by the taxpayer for said property is $________ per share. 8. Furnishing statement to employer: A copy of this statement has been furnished to _______________ Date: ________________ ________________________________

EXHIBIT 10.3 BROADBAND SPORTS, INC. INVESTORS' RIGHTS AGREEMENT ---------------------------------------------------------- THIS INVESTORS' RIGHTS AGREEMENT (this "Agreement") is made as of the 21st day of May, 1999, by and among Broadband Sports, Inc., a Delaware corporation (the "Company"), each of the investors listed on Schedule A hereto (each an "Investor" and collectively the "Investors"), Tyler Goldman, Ross Schaufelberger and NMSS Partners, LLC, a Delaware limited liability company. R E C I T A L S WHEREAS, the Company and certain of the Investors have entered into, as of the date hereof, a Series B Preferred Stock Purchase Agreement (the "Initial Series B Agreement") pursuant to which the Company will issue and sell shares of the Series B Preferred Stock of the Company (the "Series B Preferred Stock") to the Investors; WHEREAS, certain of the Company's and such Investors' obligations under the Series B Agreement are conditioned upon the execution and delivery of this Agreement by such Investors and the Company; and WHEREAS, the Company may sell and issue additional shares of Series B Preferred Stock (the "Additional Series B Shares") to certain Investors and other investors (the "Additional Series B Investors") pursuant to the Initial Series B Agreement (or an agreement substantially similar to the Series B Agreement) entered into between the Company and such Additional Series B Investors (collectively with the Initial Series B Agreement, the "Series B Agreement"). NOW, THEREFORE, in consideration of the mutual premises and covenants set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged hereby, the parties hereto agree as follows: 1. Registration Rights. 1.1. Definitions. For purposes of this Agreement: (a) The term "Act" means the Securities Act of 1933, as amended. (b) The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC. 1

(c) The term "Founders' Shares" means 37,916,660 shares of Common Stock (subject to appropriate adjustments for stock splits, stock dividends, combinations and other recapitalizations (collectively, a "Recapitalization")) issued to and held by Tyler Goldman as of the date hereof, 9,787,500 shares of Common Stock (subject to appropriate adjustments for any Recapitalization) issued to and held by Ross Schaufelberger as of the date hereof and 82,633,340 shares of Common Stock (subject to appropriate adjustments for any Recapitalization) issued to and held by NMSS Partners, LLC, as of the date hereof. (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof. (e) The term "1934 Act" shall mean the Securities Exchange Act of 1934, as amended. (f) The term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document. (g) The term "Registrable Securities" means (i) the Common Stock issuable or issued upon conversion of the Series B Preferred Stock, (ii) the shares of Common Stock (the "Venture Capital Shares") held as of the date hereof by Sequoia Capital VIII, Sequoia International Technology Partners VIII, Sequoia International Technology Partners VIII (Q), CMS Partners LLC, Institutional Venture Partners VIII, L.P., IVM Investment Fund VIII, LLC and IVP Broadband Fund, L.P., (iii) the Founders' Shares, and (iv) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of the shares referenced in (i), (ii) or (iii) above, excluding in all cases, however, any Registrable Securities that have been sold by a person in a transaction in which his or her rights under this Section 1 are not assigned or that have been sold by a person pursuant to a registration statement under the Act covering such Registrable Securities that has been declared effective by the SEC or in an open market transaction under Rule 144 of the Act. Notwithstanding anything to the contrary set forth in this Section 1.1(g), neither the Founders' Shares (or any shares of Common Stock otherwise deemed "Registrable Securities" with respect thereto pursuant to clause (iv) of this Section 1.1(g)) shall be deemed Registrable Securities and the holders thereof shall not be deemed Holders for the purposes of Sections 1.2, 1.6, 1.12 and 1.14. (h) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities. (i) The term "SEC" shall mean the Securities and Exchange Commission. 2

1.2. Request for Registration. (a) If the Company shall receive at any time after the earlier of the two-year anniversary of the date hereof or one year after the effective date of the first registration statement for a public offering of securities of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction), a written request from the Holders of a majority of the Registrable Securities then outstanding that the Company file a registration statement under the Act covering the registration of at least thirty percent (30%) of the Registrable Securities then outstanding, then the Company shall: (i) within ten (10) days of the receipt thereof, give written notice of such request to all Holders; and (ii) as soon as practicable, use commercially reasonable efforts to effect the registration under the Act of all Registrable Securities which the Holders request to be registered, together with all or such portion of the Registrable Securities of any Holder or Holders joining in such request as are specified in a written request received by the Company, within twenty (20) days of the mailing of such notice by the Company in accordance with Section 3.6, subject to the limitations of subsection 1.2(b). (b) If the Holders initiating the registration request hereunder ("Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. 3

(c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than 120 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2: (i) After the Company has effected two (2) registrations requested by the Holders of Registrable Securities pursuant to this Section 1.2 and such registrations have been declared or ordered effective; (ii) During the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a registration subject to Section 1.3 hereof; provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; or (iii) If the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.12 below. 1.3. Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities which are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in accordance with Section 3.6, the Company shall, subject to the provisions of Section 1.8, use its reasonable efforts to cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. Each holder hereby acknowledges that the Company is currently in the process of registering shares of its Common Stock under the Act in connection with an initial public offering that satisfies the requirements of this Section 1.3 (the "Proposed Initial Public Offering") and, in connection therewith and notwithstanding anything to the contrary set forth in this Agreement, each Holder hereby waives its right to receive notice of and 4

otherwise participate in such proposed registration to the extent that the registration statement related thereto is filed with the SEC within 60 days of the date of this Agreement. 1.4. Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use commercially reasonable efforts to cause such registration statement to become effective; (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement; (c) Furnish to each Holder such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as it may reasonably request from time to time in order to facilitate the disposition of Registrable Securities owned by it; (d) Use commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already required to qualify to do business or subject to service in such jurisdiction and except as may be required by the Act; (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement; (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; (g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed; and 5

(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration. 1.5. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6. Expenses of Demand Registration. All expenses other than underwriting discounts and commissions incurred in connection with registrations, filings or qualifications pursuant to Section 1.2, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements, not to exceed $20,000, of one counsel for the selling Holders) shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2. 1.7. Expenses of Company Registration. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 1.3 for each Holder, including (without limitation) all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders thereunder (if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements, not to exceed $20,000, of one counsel for the selling Holders selected by them), but excluding underwriting discounts and commissions relating to Registrable Securities. 1.8. Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it and then only in such quantity as the underwriters determine in their sole discretion will not, jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the number of shares 6

of Holders' securities to be included in such offering shall be reduced in such manner as the Company and the underwriters determine to permit the success of such offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall (i) the amount of securities of the selling Holders of Registrable Securities included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, unless such offering is the initial public offering of the Company's securities in which case the selling stockholders may be excluded if the underwriters make the determination described above and no other stockholders' securities are included, (ii) notwithstanding (i) above, any shares being sold by a stockholder exercising a demand registration right similar to that granted in Section 1.2 be excluded from such offering, or (iii) the number of shares of Registrable Securities to be included in such offering (excluding any Founders' Shares and Venture Capital Shares) be reduced unless the Founders' Shares and Venture Capital Shares are first entirely excluded from such underwriting. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a holder of Registrable Securities and which is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling stockholder," and any pro-rata reduction with respect to such "selling stockholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling stockholder," as defined in this sentence. 1.9. Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10. Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act or the 1934 Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, or any rule or regulation promulgated under the Act or the 1934 Act; and the Company will pay to each such Holder, underwriter or controlling person any legal or other expenses reasonably incurred by them in connection with 7

investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to (1) amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), or (2) any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other stockholder of the Company that is selling securities in such registration statement and any controlling person of any such underwriter or such other stockholder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act or the 1934 Act, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this subsection 1.10(b) exceed the gross proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written 8

notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. (d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. (f) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.11. Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and 9

(d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statement filed by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.12. Form S-3 Registration. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) as soon as practicable, use commercially reasonable efforts to effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $500,000; (3) if the Company shall furnish to the Holders a certificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 60 days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; (4) if the Company has, within the twelve (12) month period preceding the date of such request, already effected two registrations on Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (c) Subject to the foregoing, the Company shall use commercially reasonable efforts to file a registration statement covering the Registrable Securities and other 10

securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. All expenses other than underwriting discounts and commissions incurred in connection with the first two (2) registrations requested pursuant to Section 1.12, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company (including fees and disbursements of counsel for the Company in its capacity as counsel to the selling Holders hereunder; if Company counsel does not make itself available for this purpose, the Company will pay the reasonable fees and disbursements, not to exceed $20,000, of one counsel for the selling Holders) shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.12 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to have the Company bear the expenses of one (1) Form S-3 registration pursuant to this Section 1.12. Except as provided in the immediately preceding sentence, all expenses incurred in connection with a registration requested pursuant to this Section 1.12, including (without limitation) all registration, filing, qualification, printer's and accounting fees and the reasonable fees and disbursements of counsel for the selling Holder or Holders and counsel for the Company, shall be borne pro rata by the Holder or Holders participating in the Form S-3 Registration. Registrations effected pursuant to this Section 1.12 shall not be counted as demands for registration or registrations effected pursuant to Sections 1.2 or 1.3, respectively. 1.13. Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities who, after such assignment or transfer, holds at least two million (2,000,000) shares of Registrable Securities (subject to appropriate adjustment for any Recapitalization ) provided: (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including without limitation the provisions of Section 1.15 below; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. 1.14. Limitations on Subsequent Registration Rights. Except with respect to Additional Series B Investors, from and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the outstanding Registrable 11

Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 1.2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in subsection 1.2(a) or within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 1.2. 1.15. "Market Stand-Off" Agreement. Each Holder hereby agrees that, during the period of duration specified by the Company and an underwriter of Common Stock or other securities of the Company, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of the Company held by it at any time during such period except Common Stock included in such registration; provided, however, that: (a) such agreement shall be applicable only to the first registration statement of the Company which covers Common Stock (or other securities) to be sold on its behalf to the public in an underwritten offering; (b) such market stand-off time period shall not exceed 180 days; and (c) all executive officers and directors of the Company and all other persons with registration rights enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop- transfer instructions with respect to the Registrable Securities of each Holder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Notwithstanding the foregoing, the obligations described in this Section 1.15 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms which may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms which may be promulgated in the future. Without limiting the generality of the foregoing, in connection with the Proposed Initial Public Offering, each Investor hereby agrees to the terms of the lock-up letter attached hereto as Schedule B, which terms are incorporated herein by this reference. 1.16. Termination of Registration Rights. (a) No Holder shall be entitled to exercise any right provided for in this Section 1 after three (3) years following the consummation of the sale of securities pursuant 12

to a registration statement filed by the Company under the Act in connection with the initial firm commitment underwritten offering of its Common Stock to the general public. (b) In addition, the right of any Holder to request registration or inclusion in any registration pursuant to this Section 1 shall terminate on such date after the closing of the first Company-initiated registered public offering of Common Stock of the Company as all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under Rule 144 during any 90-day period. 2. Covenants of the Company. 2.1. Delivery of Audited Financial Statements. The Company shall deliver to each Investor, as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the Company and statement of stockholder's equity as of the end of such year, and a schedule as to the sources and applications of funds for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company. 2.2. Delivery of Quarterly Financial Statements. The Company shall deliver to each Investor holding at least two million (2,000,000) shares of Registrable Securities (subject to appropriate adjustment for any Recapitalization), as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, an unaudited profit or loss statement, schedule as to the sources and application of funds for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter. 2.3. Assignment of Right to Receive Financial Information. The rights, if any, to receive certain financial information regarding the Company pursuant to this Section 2 may be assigned by an Investor to a transferee or assignee of such Investor that, after such assignment or transfer, holds at least two million (2,000,000) shares of Registrable Securities (subject to appropriate adjustment for any Recapitalization ) provided; the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership. 2.4. Termination of Financial Covenants. The covenants set forth in this Section 2 shall terminate and be of no further force or effect when the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated or when 13

the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall first occur. 3. Miscellaneous. 3.1. Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 3.2. Additional Series B Investors. Upon the sale of Additional Series B Shares to Additional Series B Investors, the Company, without prior action on the part of any of the Investors, shall require each Additional Series B Investor to execute this Agreement. Each such Additional Series B Investor, upon execution and delivery of this Agreement by the Company and such Additional Series B Investor, shall be deemed an Investor hereunder. 3.3. Governing Law. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within California. 3.4. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 3.5. Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 3.6. Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given (i) upon personal delivery to the party to be notified; or (ii) by deposit with an overnight delivery service or with the United States Post Office, by certified mail, postage prepaid, and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by ten (10) days' advance written notice to the other parties. 3.7. Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 3.8. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or 14

in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of a majority of the then- outstanding Registrable Securities subject to or enjoying the rights under the provisions being amended or waived. Any amendment or waiver effected in accordance with this Section 3.7 shall be binding upon each holder of any Registrable Securities then outstanding, each future holder of all such Registrable Securities, and the Company. 3.9. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 3.10. Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 3.11. Entire Agreement. This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. 15

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. BROADBAND SPORTS, INC. By:/s/ Tyler Goldman ------------------------ Tyler Goldman, President Address: 1640 South Sepulveda Boulevard Suite 500 Los Angeles, California 90025 NMSS PARTNERS, LLC, a Delaware limited liability company By: M&K Financial Capital Corp., Manager By: --------------------------------- Ahmed O. Alfi Address: ----------------------------- ----------------------------- ----------------------------- /s/ Tyler Goldman -------------------------------------- Tyler Goldman Address: 235 Main Street ----------------------------- Venice, CA ----------------------------- ----------------------------- /s/ Ross Schaufelberger -------------------------------------- Ross Schaufelberger Address: 1440 Veteren #612 ----------------------------- Los Angeles, CA 90024 ----------------------------- ----------------------------- 16

INVESTOR: By: ------------------------------------------- Name: ----------------------------------------- Address: -------------------------------------- -------------------------------------- -------------------------------------- 17

Schedule A Schedule of Investors --------------------- 18

Schedule B ---------- Broadband Sports, Inc. Lock-Up Agreement May __, 1999 Hambrecht & Quist LLC SG Cowen Securities Corporation William Blair & Company L.L.C. As Representatives of the Several Underwriters c/o Hambrecht & Quist LLC One Bush Street San Francisco, California 94104 Ladies and Gentlemen: The undersigned is a securityholder of BroadBand Sports, Inc. (the "Company") and wishes to facilitate the public offering (the "Offering") of Common Stock of the Company ("Common Stock") pursuant to a Registration Statement on Form S-1 (the "Registration Statement") to be transmitted for filing with the Securities and Exchange Commission on or about May 26, 1999. In consideration of the foregoing, in order to induce you to act as underwriters in the Offering, and for other good and valuable consideration, receipt of which is hereby acknowledged, the undersigned hereby irrevocably agrees that it will not, directly or indirectly, sell, offer, contract to sell, transfer the economic risk of ownership in, make any short sale, pledge, loan or otherwise dispose of (each, a "Disposition") any shares of Common Stock or any options or warrants to purchase any shares of Common Stock or any securities convertible into or exchangeable or exercisable for or any other rights to purchase or acquire Common Stock (collectively, "Securities"), without the prior written consent of Hambrecht & Quist LLC acting alone or of each of the Representatives of the Underwriters acting jointly, beginning on the date of the prospectus and ending 180 days from the date of the final prospectus related to the Offering (the "Lock-Up Period"). Notwithstanding the foregoing, this Lock-Up Agreement shall not apply to shares of the Company's Common Stock acquired pursuant to an effective registration statement filed by the Company or on the open market after the consummation of the Offering. Notwithstanding the foregoing, (i) if the undersigned is a corporation or partnership, it may distribute Securities on a pro rata basis to shareholders or limited partners, respectively, so long as such transaction does not involve a disposition for value; and (ii) if the undersigned is an individual, he or she may transfer Securities either during his or her lifetime or, on death, by will 19

or intestacy to his or her immediate family or to a charitable organization or to a trust the beneficiaries of which are exclusively the undersigned and/or a member or members of his or her immediate family; provided in each such case, however, that prior to any such transfer each donee, transferee or distributee shall execute an agreement, satisfactory to Hambrecht & Quist LLC, pursuant to which each donee, transferee or distributee shall agree to receive and hold such Securities subject to the provisions hereof, and there shall be no further transfer except in accordance with the provisions hereof. For the purposes of this paragraph, "immediate family" shall mean spouse, lineal descendant, father, mother, brother or sister of the transferor and "charitable organization" shall mean an organization described in Section 501(c)(3)of the Internal Revenue Code of 1986, as amended. The foregoing restriction on Dispositions is expressly agreed to preclude the holder of the Securities from engaging in any hedging or other transaction which is designed to or reasonably expected to lead to or result in a Disposition of Securities during the Lock-Up Period even if such Securities would be disposed of by someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale (whether or not against the box) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to any Securities or with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from Securities. The undersigned hereby waives any rights of the undersigned to sell shares of Common Stock or any other security issued by the Company pursuant to the Registration Statement, and acknowledges and agrees that for a period of 180 days from the effective date of the Registration Statement the undersigned has no right to require the Company to register under the Securities Act of 1933 such Common Stock or other securities issued by the Company and beneficially owned by the undersigned. The undersigned understands that the agreements of the undersigned are irrevocable and shall be binding upon the undersigned's heirs, legal representatives, successors and assigns. The undersigned agrees and consents to the entry of stop transfer instructions with the Company's transfer agent against the transfer of Common Stock or other securities of the Company held by the undersigned except in compliance with this agreement. Very truly yours, Dated: ---------------------- ------------------------------------------ Signature ------------------------------------------ Printed Name ------------------------------------------ Address ------------------------------------------ 20

Exhibit 10.8 REVOLVING LOAN AGREEMENT THIS LOAN AGREEMENT (this "Agreement") is made and entered into as of this 27th day of February, 1998 (the "Effective Date,"), by and between E-Sport, Inc., a Delaware corporation (the "Borrower"), Athlete Direct Inc., a corporation and wholly owned subsidiary of Borrower ("AD"), Pro Sports Xchange, a Delaware corporation and wholly owned subsidiary of Borrower ("PSX," and collectively with, AD, the "Subsidiaries"), and NMSS Partners, LLC, a Delaware limited liability company (the "Lender"). RECITALS A. WHEREAS, Borrower desires to borrow up to Four Million Five Hundred Thousand Dollars ($4,500,000) for working capital purposes of Borrower and its Subsidiaries from Lender; and B. WHEREAS, Lender has agreed to make a loan in the principal amount of up to Four Million Five Hundred Thousand Dollars ($4,500,000) to Borrower in accordance with the terms and conditions provided herein. AGREEMENT NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, agreements, representation and warranties hereinafter set forth, the parties hereto agree as follows: 1. DEFINITIONS. 1.1 Business Day. The term "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in the United States are required by law to close. 1.2 Maturity Date. The term "Maturity Date" means the earlier of (a) ___________________ (b) the date on which any of the following transactions are consummated: (i) any acquisition of the Borrower by means of merger or other form of corporate reorganization in which outstanding shares of the Borrower are exchanged for securities or other consideration issued, or caused to be issued, by the acquiring corporation or its subsidiary (other than a mere reincorporation transaction or a transaction in which, upon consummation, more than 60% of the outstanding voting securities of the acquiring corporation are owned by the common stockholders of the Borrower as in existence immediately prior to the consummation of such transaction), (ii) a sale of all or substantially all of the assets or stock of the Borrower to any entity in which more than 60% of the equity interests in such entity are not held by the common stockholders of the Borrower as in existence immediately prior to the consummation of such transaction, or (iii) an underwritten public offering of the Common Stock of the 1

Borrower pursuant to the Securities Act of 1933 which results in net proceeds to the Borrower of at least $10 million. 2. AMOUNT AND TERMS OF THE LOAN. 2.1 Loan. Subject to, and upon the terms and conditions herein set forth (including, without limitation, the restrictions contained in Section 5.7 hereof), Lender agrees to make a loan to Borrower in the principal amount of up to Four Million Five Hundred Thousand Dollars ($4,500,000) (the "Loan"). Borrower may request disbursements of all or a portion of the Loan, subject to the restrictions set forth in Section 5.7 hereof, at any time prior to the Maturity Date upon the terms and limitations contained herein; provided; however, that the principal balance outstanding at any time shall not exceed $4,500,000. 2.2 Interest. Interest shall accrue on the unpaid principal balance of the Loan at the Loan Rate. The "Loan Rate" shall be the lesser of the prime rate plus one percent (1%) or the maximum rate allowable by law. The prime rate as. of any date shall be determined by reference to the prime rate as published in the Wall Street Journal (the base rate on corporate loans posted by at least 75% of the thirty largest U.S. banks). Interest shall be payable monthly on the last day of the month, provided that should such date not be a Business Day, interest shall be payable on the next Business Day. Any amount of principal and accrued interest which is not paid when due shall bear interest from the date on which such amount is due until such amount is paid in full, payable on demand, at the Loan Rate or the maximum rate allowable by law. Interest shall be computed daily at the Loan Rate on the basis of the actual number of days in which all or any portion of the principal amount hereof is outstanding computed on the basis of a 360 day year. Principal and interest shall be payable in lawful money of the United States at Lender's offices located at the address set forth below. 2.3 Disbursements. Borrower may borrow any amount up to an aggregate amount of Four Million Five Hundred Thousand Dollars ($4,500,000) by providing written notice to Lender ___________________ which notice shall include the amount of such borrowing, the date of such borrowing and certification as to the satisfaction of the conditions set forth in Section 5 hereof; provided _______________________________ _____________________________________________. Within the limits set forth in this Agreement, Borrower may borrow, repay and reborrow amounts under this Agreement, provide that the aggregate principal balance outstanding under this Agreement at any given time shall not exceed Four Million Five Hundred Thousand Dollars ($4,500,000). 2.4 Recordings of Disbursements. All disbursements of the Loan made by Lender and all repayments of the principal thereof shall be recorded by Lender and endorsed by an officer of Borrower on Schedule A attached hereto, or on a continuation of 2

such schedule attached to and made a part hereof; provided that the failure of Lender to make any such recordation or of Borrower to make any such endorsement shall not affect the obligations of Borrower hereunder. 3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Each of the Borrower and the Subsidiaries represent and wan-ant to Lender that: 3.1 Organization and Standing; Charter Documents. It is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to own, lease and operate its property and to conduct its business as such is presently conducted and as proposed to be conducted. It is duly qualified to do business as a foreign corporation in any state or jurisdiction in the United States in which the failure to be so qualified would have a material adverse effect on its financial condition or its ability to perform its obligations hereunder. True and accurate copies of the Certificate of Incorporation and Bylaws of it, each as currently in effect, have been made available to Lender and its counsel. 3.2 Authorization. All corporate action on the part of it and its officers, directors and shareholders that is necessary for the authorization, execution, delivery and performance of this Agreement and any other documents or certificates related thereto (collectively, the "Loan Documents") by it has been taken; and the Loan Documents, when executed and delivered, will constitute valid and legally binding obligations of it, enforceable against it in accordance with their terms. 3.3 Consents. All consents, approvals, orders, waivers of authorizations of, or registrations, qualifications, designations, declarations or filings with, any court or any federal or state governmental authority or third party required on the part of it in connection with the consummation of the transactions contemplated by this Agreement and the other Loan Documents will have been obtained prior to and be effective as of the Effective Date. 3.4 Compliance with Other Instruments. It is not in violation of or default under any provision of its Certificate of Incorporation or Bylaws. It is not in violation of or default in any material respect under any provision of any material instrument or contract to which it is a party or by which it is bound, or, to its knowledge, of any provision of any federal or state statute, rule, governmental regulation, order or decree, applicable to it. 3.5 Conduct of Business. The conduct of its business, as now conducted and as proposed to be conducted, will not conflict with or result in a breach of any material terms, conditions or provisions of, or constitute a default under, any material contract, covenant or instrument under which it is now obligated. 3

3.6 Title to Property and Assets. It owns all of its property and assets free and clear of all mortgages, liens, claims, loans and encumbrances, other than any mortgages, liens, claims, loans or encumbrances created hereunder. 3.7 Information: Misleading Statements. No representation, warranty or statement by it in this Agreement or the other Loan Documents, or in any written statement or certificate furnished or to be furnished to Lender pursuant thereto contains or will contain any untrue statement of a material fact or, when taken together, omits or will omit to state a material fact necessary to make the statements made herein or therein, in light of the circumstances in which made, not misleading. 4. REPRESENTATIONS AND WARRANTIES OF LENDER. Lender represents and warrants to each of the Borrower and the Subsidiaries that: 4.1 Organization and Standing; Charter Documents. Lender is duly formed, validly existing and in good standing under the laws of the State of Delaware, and has the requisite power and authority to own, lease and operate its property and to conduct its business as such is presently conducted and is proposed to be conducted. 4.2 Authorization. All action on the part of Lender and its members that is necessary for the authorization, execution, delivery and performance of the Loan Documents by Lender has been taken; and the Loan Documents, when executed and delivered, will constitute a valid and legally binding obligations of Lender, enforceable in accordance with their terms. 5. CONDITIONS PRECEDENT TO LOAN. The obligation of Lender to make each disbursement of the Loan is subject to the satisfaction (or written waiver by Lender) of all the flowing conditions precedent: 5.1 Representations True. All representations and warranties contained in this Agreement and all other Loan Documents will be true, correct and complete in all respects with the same effect as though such representations and warranties had been made on and as of each disbursement of the Loan. 5.2 Corporate Documents. Lender will have received, in form and substance satisfactory to Lender and its counsel, a copy of the records of all actions taken by Borrower and the Subsidiaries, including all corporate resolutions of Borrower and the Subsidiaries authorizing or relating to the execution, delivery and performance of the Loan Documents and the consummation of the transactions contemplated thereby, and a certified copy of the Certificates of Incorporation and Bylaws of Borrower and the Subsidiaries. 5.3 Qualifications and Consents. All authorizations, approvals, permits, consents or waivers if any, of (i) governmental authority or regulatory body of 4

the United States or of any state or (ii) any third party that are required on the part of Borrower or the Subsidiaries in connection with the receipt of the Loan or the execution of this Agreement will have been duly obtained and will be effective on and as of the Effective Date. 5.4 Proceedings and Documents. All corporate and other proceedings in connection with the transaction contemplated by this Agreement and all documents incident to such transaction will be in form and substance satisfactory to Lender and its counsel, and Lender will have received all counterpart originals or certified or other copies of such documents as it may reasonably request. 5.5 Performance. Borrower and the Subsidiaries shall have performed and complied with all agreements and conditions contained herein required to be performed or complied with by them prior to or at each disbursement of the Loan. 5.6 Absence of Litigation. No suit, action, proceeding or investigation shall have occurred, be pending or threatened which would or seeks to prevent or delay beyond the Effective Date the consummation of the transactions contemplated by this Agreement and there shall be no other pending or threatened material litigation. 5.7 Loan in Compliance with Annual Budget. Lender will have received, in form and substance satisfactory to Lender and its counsel, a certificate signed by at least two of the Company's officers stating that the amount of the Loan disbursement requested by the Company does not exceed the amount permitted to be drawn during that calendar year under the Company's annual budget, which budget has been approved by the affirmative vote of at least four of the five authorized directors of the Company. 6. SECURITY INTEREST. As security for the payment of principal and accrued interest under this Agreement, each of the Borrower and the Subsidiaries hereby grants to the Lender a security interest in all of the their respective assets listed on Schedule B attached hereto (the "Collateral"). Borrower and the Subsidiaries shall not and nothing in this Section 6 shall constitute, or be deemed to constitute, a grant of authority to Borrower or the Subsidiaries to, sell, lease, or otherwise dispose of or encumber the Collateral, or any part of the Collateral, without the prior written consent of Lender, except in the ordinary course of business or as otherwise provided herein. The security interest hereby created shall attach immediately upon execution of this Agreement and concurrently herewith, Borrower and the Subsidiaries shall execute any financing statement or financing statements requested by Lender to perfect the security interest created hereby. Such financing statement or statements shall be on a form or forms approved by the California Secretary of State and Borrower and the Subsidiaries shall forthwith pay to Lender the filing fees required to file such statement or statements in the manner required by the Uniform Commercial Code of California. In addition, Borrower and the Subsidiaries shall pay from their own funds, as they become due, all taxes and assessments levied or 5

assessed against the Collateral, or any part of the Collateral, prior to the final termination of this Agreement. Upon any event of default hereunder, the Lender shall be entitled to all the rights and remedies of a secured creditor with respect to such Collateral as provided for in the Uniform Commercial Code of California. 7. COVENANTS OF BORROWER. Each of Borrower and the Subsidiaries hereby covenants and agrees with Lender that each shall: 7.1 Corporate Rights; Facilities; Conduct of Business. (a) Maintain and preserve in full force and effect its corporate existence and all rights, licenses, leases, qualifications, privileges, franchisee and other authority adequate for the conduct of its business; (b) Maintain, preserve and protect all its properties, assets, equipment and facilities in good order and working repair and condition (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all needful and proper repairs, renewals and replacements thereto; (c) Maintain, preserve and protect all of its rights to enjoy and use patents, copyrights, trademarks, trade names, service marks, licenses, leases, and franchises; (d) Promptly pay and discharge all taxes when due and payable, except such as may be contested in good faith by appropriate proceedings and for which an adequate reserve has been established and is maintained in accordance with generally accepted accounting principles (and it will promptly notify Lender of any challenge, contest or proceeding pending by or against it before any taxing authority); (e) Maintain all banking accounts at FDIC or FSLIC insured banks or other savings institutions acceptable to Lender, and (f) From time to time as may be necessary, disclose to Lender in writing any material matter hereafter arising which, if existing or occurring at the date of this Agreement, would have been required to be set forth or described by it in this Agreement or any of the other Loan Documents (including all schedules and exhibits hereto or thereto) or which is necessary to correct any information set forth or described by it hereunder or thereunder which has been rendered inaccurate thereby. 7.2 Negative Covenants. So long as any portion of the Loan remains outstanding, neither Borrower nor the Subsidiaries will, without first obtaining Lender's prior written consent: 6

(a) declare or pay any dividend on or declare or make any distribution on account of, any shares of any class of stock now or hereafter outstanding (except for dividends or distributions from a Subsidiary to the Borrower), or set apart any sum for such purpose, except for shares of Common Stock issued to its employees pursuant to stock option agreements or debentures. (b) issue or enter into any agreement that restricts the Company's ability to repay the Loan or subordinates the repayment of the Loan by more than Four Million Five Hundred Thousand Dollars ($4,500,000). (c) Use any portion of the Loan for purposes other than those directly related to the conduct of Borrower's or the Subsidiaries' businesses. 7.3 Further Assurances. In addition to the obligations and documents which this Agreement expressly requires Borrower and the Subsidiaries to execute, deliver and perform, Borrower and the Subsidiaries will execute, deliver and perform, any and all further acts or documents which Lender may reasonably require to effectuate the purposes of this Agreement or any of the other Loan Documents. 8. PREPAYMENT OF THE LOAN. Borrower may prepay the Loan at any time without penalty. 9. EVENTS OF DEFAULT OF BORROWER. 9.1 Events of Default. Each of the following shall constitute an event of default ("Event of Default") under this Agreement: (a) Borrower shall fail to pay when due (whether by acceleration or otherwise) principal under this Agreement; (b) Borrower shall fail to pay when due (whether by acceleration or otherwise) interest under this Agreement, and such default unless otherwise cured shall have continued for a period of five (5) days after receipt of notice from Lender, (c) Any representation or warranty made by or on behalf of Borrower in this Agreement, in any other Loan Document or in any statement or certificate given in writing pursuant thereto or in connection therewith is false, misleading or incomplete in any material respect when made (or deemed to have been made); (d) Borrower or the Subsidiaries fails or neglects to perform, keep or observe any covenant set forth in this Agreement and the same has not been cured within ten (10) calendar days after Borrower or the Subsidiaries receives notice thereof from Lender; 7

(e) Borrower or the Subsidiaries shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; provided, however, that any of the foregoing acts by or with respect to a Subsidiary shall not be an Event of Default if, and only if, such act will not adversely affect, impair or subordinate the Borrower's ability to repay the Loan; (f) An involuntary case or other proceeding shall be commenced against the Borrower or the Subsidiaries seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or the Subsidiaries under the federal bankruptcy laws as now or hereafter in effect; provided, however, that any of the foregoing acts by or with respect to a Subsidiary shall not be an Event of Default if, and only if, such act will not adversely affect, impair or subordinate the Borrower's ability to repay the Loan; or (g) This Agreement, for any reason (other than the satisfaction in full of all amounts owing in connection with the Loan) ceases to be, or is asserted by Borrower or the Subsidiaries not to be, a legal, valid and binding obligation of Borrower or the Subsidiaries, enforceable in accordance with its terms, and such occurrence has not been cured to Lender's satisfaction within five (5) calendar days after Borrower or the Subsidiaries receives notice thereof from Lender. 9.2 Remedies of Lender. If an Event of Default shall occur and be continuing or shall exist, the principal amount outstanding of the Loan and interest accrued thereon shall be immediately due and payable without presentment demand, protest or further notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue. 10. RESTRICTIONS ON TRANSFER OF LOAN 10.1 Right to Transfer. Lender shall not have the right or power to sell, exchange, transfer (with or without consideration), assign or otherwise dispose of (such 8

actions being collectively referred to in this Agreement as "Transfers") the Loan, or any interest therein, except: (a) Transfers pursuant to a firmly underwritten public offering of the Borrower's common stock on a Form S- 1, Form SB- I or Form SB-2 Registration Statement filed with the Securities and Exchange Commission under the Securities Act with respect to which the Borrower receives net proceeds of at least $10,000,000 (a "Qualified Public Offering") or Transfers to any member or other equity owner of Lender or any person or entity dud, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with the Lender (an "Affiliated Entity"); provided, however, that any such Affiliated Entity shall agree in a writing deposited with the Borrower prior to such Transfer to be bound by all of the terms of this Agreement as the "Lender" hereunder. (b) Transfers in accordance with the provisions of Section 10.2 below. 10.2 Transfer of Loan. (a) Except for Transfers permitted by the provisions of Section 10.1 (a) above, the Lender shall not Transfer the Loan unless the consideration for such Transfer consists solely of cash and unless the Lender has first given each of the common stockholders of the Borrower the right to purchase the Loan by delivering to the common stockholders a written offer (the "Offer") to sell the Loan to each and every one of the other common stockholders, which Offer (i) shall remain open for at least thirty (30) days from the date of its transmittal (the "Offer Period"), (ii) shall state its exact termination date, and (iii) shall state the identity of the proposed transferee, the price, closing date and all other material terms and conditions of the proposed Transfer. The Offer shall be on the same terms and conditions as the proposed Transfer. (b) The Offer may be accepted by any of the common stockholders, (any stockholder so accepting shall be referred to herein as a "Subscribing Stockholder") only by giving written notice of acceptance delivered to the Lender prior to the expiration of the Offer Period, provided that the Subscribing Stockholders collectively shall have accepted the Offer to purchase all (but not less than all) of the Loan. Each Subscribing Stockholder shall be entitled to purchase that fraction of the Loan equal to the fraction obtained by dividing the sum of the number of shares of common stock which such Subscribing Stockholder owns by the aggregate number of shares of common stock then issued and outstanding. Following the foregoing allocation, if any fraction of the Loan remains unallocated and all Subscribing Stockholders' subscriptions have not been filled, the balance of the Loan shall be iteratively allocated by the Borrower among the Subscribing Stockholders whose 9

subscriptions have not been filled, pro rata based upon the foregoing fractions or as mutually agreed to between Subscribing Stockholders, until either the entire balance of the Loan has been allocated, or all subscriptions have been filled. (c) Upon termination of the Offer Period, provided that the Subscribing Stockholders collectively shall have accepted the Offer to purchase all (but not less than all) of the Loan, the Borrower shall give written notice to that effect to all Subscribing Stockholders, stating the fraction of the Loan allocated to each Subscribing Stockholder, and the Transfer of the Loan shall thereafter be effected between the Lender and the Subscribing Stockholders upon all of the applicable terms and conditions set forth in the Offer. (d) To the extent the entire balance of the Loan has not been fully subscribed by the common stockholders, pursuant to the terms and conditions of Section 11.2(b) above, prior to the expiration of the Offer Period, the Lender shall be free for a period of ninety (90) days beginning the day immediately following the day on which the Offer Period expires to sell to the proposed transferee identified in the Offer the Loan, provided that such sale must be at the same price, and upon the other terms and conditions specified in the Offer. (e) Notwithstanding anything to the contrary set forth herein, Lender shall not be permitted to Transfer the Loan to a person (or a person which is controlled by, under common control with, or controls such person) that competes directly with one or more of the lines of business of the Borrower or the Subsidiaries as conducted at the time of such Transfer, unless such Transfer has been approved by at least four of the five authorized directors of the Borrower. 11. MISCELLANEOUS. 11.1 Survival of Representations and Warranties. The representations and warranties contained herein or made pursuant to this Agreement and all other Loan Documents shall survive until the termination of this Agreement. 11.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon personal delivery, facsimile transmission (with written or facsimile confirmation of receipt), telex or delivery by a reputable overnight commercial delivery service (delivery, postage or freight charges prepaid), or on the fourth day following deposit in the United States mail (if sent by registered or certified mail, return receipt requested, delivery, postage or freight charges prepaid), addressed to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 10

(a) if to Lender, to: (b) If to Borrower or the Subsidiaries, to: NMSS Partners, LLC 11 West Del Mar Boulevard E-Sport, Inc. Pasadena, CA 91105 _______________________ Attention: Ahmed O. Alfi _____________, CA 92 FAX: (818) 405-9708 Attention:______________ FAX: (714) ______________ 11.3 Interpretation. When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article, Section, Exhibit or Schedule to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." 11.4 Counterparts. This Agreement may be executed by one or more of the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same agreement and shall become effective when all counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 11.5 Integration. This Agreement, the exhibits and schedules attached hereto and thereto constitute the entire agreement among the parties with respect to the subject matter set forth herein or therein and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof or thereof. 11.6 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 11.7 Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of California, excluding its rules of conflicts of law or choice of law. 11.8 Assignment. Borrower shall not assign or transfer or permit the assignment or transfer of any of its rights or obligations under this Agreement without the prior written consent of Lender. 11.9 Severability. Any portion or provision of the Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining portions or provisions hereof in such jurisdiction or, to the 11

extent permitted by law, rendering that or any other portion or provision of the Agreement invalid, illegal or unenforceable in any other jurisdiction. 11.10 Attorneys' Fees. If any party to this Agreement shall bring any action, suit, counterclaim or appeal for any relief against any other party, declaratory or otherwise, to enforce the terms hereof or to declare rights hereunder (collectively, an "Action"), the prevailing party shall be entitled to recover as part of any such Action its reasonable attorneys' fees and costs, including any fees and costs incurred in bringing and prosecuting such Action and/or enforcing any order, judgment, ruling or award granted as part of such Action. "Prevailing party" within' the meaning of this section includes, without limitation, a party who agrees to dismiss an Action upon the other party's payment of all or a portion of the sums allegedly due or performance of the covenants allegedly breached, or who obtains substantially the relief sought by it. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BORROWER: LENDER: E-SPORT, INC. NMSS PARTNERS, LLC By: /s/ Tyler Goldman By: M&K Financial Capital Corp. -------------------------- Manager Tyler Goldman President By: /s/ Ahmed O. Alfi ---------------------- Ahmed O. Alfi President By: /s/ Ross Schaufelberger -------------------------- Ross Schaufelberger Treasurer and Secretary ATHLETE DIRECT, INC. PRO SPORTS EXCHANGE By: /s/ Ross Schaufelberger By: /s/ Tyler Goldman -------------------------- ----------------------- Ross Schaufelberger Tyler Goldman President President By: /s/ Michael Scharnagi By: /s/ Ross Schaufelberger -------------------------- ------------------------ Michael Scharnagi Ross Schaufelberger Treasurer and Secretary Treasurer and Secretary 12

SCHEDULE A Revolving Promissory Note LOANS AND PAYMENTS OF PRINCIPAL <TABLE> <CAPTION> ---------------------------------------------------------------------------------------------------------- Unpaid Lender Amount of Amount of Principal Recordation Borrower Date Loan Principal Repaid Balance by Endorsement By ---------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> ---------------------------------------------------------------------------------------------------------- Feb 27, 98 $450,000 AA RS ---------------------------------------------------------------------------------------------------------- </TABLE> 13

SCHEDULE B ASSET OF BORROWER AND THE SUBSIDIARIES. (A) all accounts receivable and other rights to payment of money, together with all rights, claims, titles, securities, security interests, liens and guaranties evidencing, securing, guaranteeing payment of, relating to or otherwise with respect to such accounts receivable and rights, including, without limitation, any rights to stoppage in transit, replevin, reclamation and resale and all interest, finance charges or other amounts payable in respect of the foregoing; (B) all notes receivable; (C) all inventory; (D) all equipment; (E) all documents and documents of title, including, without limitation, bills of lading, warehouse receipts, trust receipts and the like; (F) all chattel paper, documents, instruments, money, notes and drafts; (G) all licenses, licensing agreements, contracts, agreements, rights to payment, royalties, license fees, leases of personal property, undertakings, surety bonds, all forms of obligations owing to the Borrower or the Subsidiaries or in which the Borrower or the Subsidiaries may have an interest, however arising or created, all present and future chooses and things in action, goodwill, governmental approvals, tax refunds, all other general intangibles of every kind and nature to which the Borrower or the Subsidiaries may now or hereafter become entitled and however arising, all other refunds of any kind and nature and all rights, remedies, powers and privileges of the Borrower or the Subsidiaries with respect to any of the foregoing; (H) all deposit accounts, including, without limitation, any collection accounts and concentration accounts and any other demand, time savings, passbook or like account maintained by the Borrower or the Subsidiaries with any bank, savings and loan association, credit union or other person, all money, cash and checks, drafts, notes, bills, bills of exchange and bonds deposited therein or credited thereto, any increases, renewals, extensions, substitutions and replacements thereof, all interest accruing thereon or any other property of the Borrower or the Subsidiaries received or receivable by the Borrower or the Subsidiaries in respect thereof, whether or not deposited in any such deposit account and all statements, certificates, passbooks and instruments representing any such deposit account; 14

(I) all intellectual property rights (including, without limitation, any and all rights of the Borrower or the Subsidiaries to sue and collect damages for past, present or feature infringements of any intellectual property rights or for any injury to the goodwill associated with any intellectual property right), trade secrets, catalogs, computer programs, purchase orders, computer software (including, without limitation, all source codes and object codes, all media of any type or nature on which such source codes or object codes are reproduced, copies, stored or maintained at any time and from time to time, and all licenses or other rights entitling the Borrower or the Subsidiaries to use, copy and reproduce such object codes and source codes and all licenses and other rights granted by the Borrower or the Subsidiaries to any other person or entity to copy, use, sell, market or reproduce computer software and such source codes and object codes), technology processes, drawings, blueprints, proprietary information, customer lists, mailing lists; (J) all stocks, bonds, debentures, securities, subscription rights, options, warrants, puts, calls, certificates, partnership interests, joint venture interests, investments and/or brokerage accounts and all rights, preferences, privileges, dividends, distributions, redemption payments or liquidation payments with respect thereto; (K) all rights and claims of the Borrower or the Subsidiaries in or under all policies of insurance owned by the Borrower or the Subsidiaries or covering all or any part of the Collateral, including, but not limited to, insurance for life, fire, damage, loss, and casualty, whether covering life, personal property, real property or tangible rights, together with the proceeds, products, renewals, and replacements thereof, including prepaid or unearned premiums; (L) all books and records (including, without limitation, all books of account and ledgers of every kind and nature, customer lists, credit files, computer programs, computer software, computer tapes, other computer materials and records and electronically recorded data) pertaining to the Borrower or the Subsidiaries or any of the Collateral and all equipment, receptacles, containers and cabinets for such books and records, and all files and correspondence relating thereto; and (M) all proceeds of any of the foregoing, whether derived from voluntary or involuntary disposition or otherwise, and all products of the foregoing, whether now owned and existing or hereafter acquired or arising and all renewals, replacements, substitutions, additions, accessions, appurtenances, components, repairs, repair parts, spare parts, rents, issues, royalties and profits of, to or from any such property. "Proceed" hereunder shall include (i) whatever is now or hereafter received by the Borrower or the Subsidiaries upon the sale, exchange, collection or other disposition of any item of Collateral, whether such proceeds constitute inventory, accounts receivable, general intangible, instruments, securities, credits, documents, letters of credit, chattel paper, documents of title, warehouse receipts, leases, deposit accounts, money, contract rights, goods, equipment or other personal property, (ii) any such items that are now or hereafter acquired by the Borrower or the Subsidiaries with any proceeds of Collateral 15

hereunder, (iii) any insurance now or hereafter payable by reason of any loss or damage to any Collateral and any proceeds thereof, and (iv) the right to further transfer, including to pledge, mortgage, license, assign or sell, any of the aforementioned property or rights. 16

EXHIBIT 10.9 FORM OF INDEMNIFICATION AGREEMENT THIS AGREEMENT by and between Broadband Sports, Inc., a Delaware corporation (the "Company"), and ______________ (the "Indemnitee") is entered into effective as of _______________, 1999. WHEREAS, it is essential to the Company to retain and attract as directors and officers the most capable persons available; WHEREAS, Indemnitee is a director/officer of the Company; WHEREAS, the Certificate of Incorporation, as amended, and the Bylaws, as amended, of the Company require the Company to indemnify and advance expenses to its directors to the fullest extent permitted by law and authorize the Company to indemnify and advance expenses to its officers to the fullest extent permitted by law; WHEREAS, in recognition of Indemnitee's need for substantial protection against personal liability in order to enhance Indemnitee's continued service to the Company in an effective manner and Indemnitee's reliance on the aforesaid Certificate of Incorporation and Bylaws, and in part to provide Indemnitee with specific contractual assurance that the protection promised by such Certificate of Incorporation and Bylaws will be available to Indemnitee (regardless of, among other things, any amendment to or revocation of such Certificate of Incorporation and Bylaws or any change in the composition of the Company's Board of Directors or acquisition transaction relating to the Company), and in order to induce Indemnitee to continue to provide services to the Company as a director or officer thereof, the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of Indemnitee under the Company's directors' and officers' liability insurance policies. NOW, THEREFORE, in consideration of the premises and of Indemnitee continuing to serve the Company directly or, at its request, with another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Certain Definitions: (a) Change in Control: shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 20% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the 1

Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company's assets. (b) Expense: include attorneys' fees and all other costs, expenses and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Proceeding relating to any Indemnifiable Event. (c) Indemnifiable Event: any event or occurrence that takes place either prior to or after the execution of this Agreement, related to the fact that Indemnitee is or was a director or an officer of the Company, or while a director or officer is or was serving at the request of the Company as a director, officer, employee, trustee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, or by reason of anything done or not done by Indemnitee in any such capacity. (d) Potential Change in Control: shall be deemed to have occurred if (i) the Company enters into an agreement or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (iii) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company acting in such capacity or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding Voting Securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (e) Proceeding: any threatened, pending or completed action, suit or proceeding, or any inquiry, hearing or investigation, whether conducted by the Company or any other party, that Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other. 2

(f) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board (including the special, independent counsel referred to in Section 3) who is not a party to the particular Proceeding with respect to which Indemnitee is seeking Indemnification. (g) Voting Securities: any securities of the Company which vote generally in the election of directors. 2. Agreement to Indemnify. (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by law, as soon as practicable, but in any event no later than thirty (30) days after written demand is presented to the Company, against any and all Expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Proceeding and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (including the creation of the Trust (as defined below)). Notwithstanding anything in this Agreement to the contrary and except as provided in Section 5, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Proceeding initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Proceeding. If so requested by Indemnitee, the Company shall advance (within ten (10) business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"); provided, however, that such Expenses shall be advanced only upon delivery to the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. (b) Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the special, independent counsel referred to in Section 3 hereof is involved) that Indemnitee would not be permitted to be so indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(a) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnittee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon. 3

If there has not been a Change in Control, the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the special, independent counsel referred to in Section 3 hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in the States of California or Delaware having subject matter jurisdiction thereof and in which venue is proper seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. Expenses shall be advanced, however, only upon delivery to the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. 3. Change in Control. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events, the Company shall seek legal advice only from special, independent counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or the Indemnitee (other than in connection with such matters) within the last five years. Such independent counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the special, independent counsel referred to above and to indemnify fully such counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or the engagement of special, independent counsel pursuant hereto. 4. Establishment of Trust. In the event of a Potential Change in Control, the Company shall, upon written request by Indemnitee, create a trust (the "Trust") for the benefit of the Indemnitee and from time to time upon written request of Indemnitee shall fund such Trust in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such request to be incurred in connection with investigating, preparing for and defending any Proceeding relating to an Indemnifiable Event and any and all judgments, fines, penalties and settlement amounts of any and all Proceedings relating to an Indemnifiable Event from time to time actually paid or claimed, reasonably anticipated or proposed to be paid. The amount or amounts to be deposited in the Trust pursuant to the foregoing funding obligation shall be 4

determined by the Reviewing Party, in any case in which this special, independent counsel referred to above is involved. The terms of the Trust shall provide that upon a Change in Control (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of the Indemnitee, (ii) the trustee under the Trust (the "Trustee") shall advance, within ten (10) business days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby agrees to reimburse the Trust under the circumstances under which the Indemnitee would be required to reimburse the Company under Section 2(b) of this agreement), (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above, (iv) the Trustee shall promptly pay to the Indemnitee all amounts for which the Indemnitee shall be entitled to indemnification pursuant to this Agreement or otherwise, and (v) all unexpended funds in such Trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that the Indemnitee has been fully indemnified under the terms of this Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its obligations under this Agreement. All income earned on the assets held in the Trust shall be reported as income by the Company for federal, state, local and foreign tax purposes. 5. Indemnification for Expenses Incurred In Enforcing this Agreement. The Company shall indemnify Indemnitee against any and all-expenses (including attorneys' fees), and, if requested by Indemnitee, shall (within ten (10) business days of such request) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or under applicable law or the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to indemnification for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. 6. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Proceeding but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Proceedings relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection therewith. 7. Defense to Indemnification, Burden of Proof and Presumptions. It shall be a defense to any action brought by the Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for expenses incurred in defending a Proceeding in advance of its final disposition where the required undertaking has been tendered to the Company) that the Indemnitee has not met the standards of conduct that make it permissible under the Delaware General Corporation Law for the Company to indemnify the Indemnitee for the amount claimed. 5

In connection with any determination by the Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proving such a defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action by the Indemnitee that indemnification of the claimant is proper under the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee had not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. For purposes of this Agreement, the termination of any claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 8. Non-exclusivity. The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Certificate of Incorporation or Bylaws or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Certificate of Incorporation and Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. 9. Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer. 10. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, or such longer period as may be required by state law under the circumstances, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern. 11. Amendment of this Agreement. No supplement modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 6

12. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 13. No Duplication of Payment. The Company shall not be liable under this Agreement to make any payment in connection with any claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder. 14. Settlement of Claims. The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Company's written consent. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Company nor the Indemnitee will unreasonably withhold their consent to any proposed settlement. The Company shall not be liable to indemnify the Indemnitee under this Agreement with regard to any judicial award if the Company was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action. 15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director or officer of the Company or of any other enterprise at the Company's request. 16. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this agreement (including, without limitation, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. 7

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the _____ day of __________________, 1999. BROADBAND SPORTS, INC. By:__________________________________ Name:________________________________ Title:_______________________________ INDEMNITEE: By:__________________________________ Name:________________________________ 8

EXHIBIT 10.10 STANDARD OFFICE LEASE BY AND BETWEEN LAOP IV, LLC AS LANDLORD, AND SMARTALK TELESERVICES, INC. AS TENANT

Table of Contents ----------------- <TABLE> <CAPTION> Page ---- <S> <C> <C> ARTICLE 1 - Basic Lease Provisions.............................. 1 ARTICLE 2 - Term................................................ 3 ARTICLE 3 - Rental.............................................. 3 (a) Basic Rental........................................ 3 (b) Increase in Direct Costs............................ 4 (c) Definitions......................................... 4 (d) Determination of Payment............................ 8 ARTICLE 4 - Security Deposit.................................... 10 ARTICLE 5 - Holding Over........................................ 10 ARTICLE 6 - Personal Property Taxes............................. 10 ARTICLE 7 - Use................................................. 11 ARTICLE 8 - Condition of Premises............................... 11 ARTICLE 9 - Repairs and Alterations............................. 12 ARTICLE 10 - Liens............................................... 14 ARTICLE 11 - Project Services.................................... 14 ARTICLE 13 - Indemnity; Exemption of Landlord from Liability..... 17 (a) Indemnity........................................... 17 (b) Exemption of Landlord from Liability................ 17 ARTICLE 14 - Insurance (a) Tenant's Insurance.................................. 17 (b) Form of Policies.................................... 18 (c) Landlord's Insurance................................ 18 (d) Waiver of Subrogation............................... 18 (e) Compliance with Law................................. 19 ARTICLE 15 - Assignment and Subletting........................... 19 ARTICLE 16 - Damage or Destruction............................... 22 ARTICLE 17 - Subordination....................................... 23 ARTICLE 18 - Eminent Domain...................................... 24 </TABLE> i

ARTICLE 19 - Default............................................. 24 ARTICLE 20 - Remedies............................................ 25 ARTICLE 21 - Transfer of Landlord's Interest..................... 27 ARTICLE 22 - Broker.............................................. 27 ARTICLE 23 - Parking............................................. 27 ARTICLE 24 - Waiver.............................................. 28 ARTICLE 25 - Estoppel Certificate................................ 28 ARTICLE 26 - Liability of Landlord............................... 28 ARTICLE 27 - Inability to Perform................................ 29 ARTICLE 28 - Hazardous Waste..................................... 29 ARTICLE 29 - Surrender of Premises; Removal of Property.......... 31 ARTICLE 30 - Miscellaneous....................................... 32 (a) Severability; Entire Agreement...................... 32 (b) Attorney's Fees..................................... 32 (c) Time of Essence..................................... 32 (d) Headings............................................ 33 (e) Reserved Area....................................... 33 (f) No Option........................................... 33 (g) Use of Project Name; Improvements................... 33 (h) Rules and Regulations............................... 33 (i) Quite Possession.................................... 33 (j) Rent................................................ 33 (k) Successors and Assigns.............................. 34 (l) Notices............................................. 34 (m) Persistent Delinquencies............................ 34 (n) Right of Landlord to Perform........................ 34 (o) Access, Changes in Project, Facilities, Name........ 34 (p) Corporate Authority................................. 35 (q) Identification of Tenant............................ 35 (r) Substitute Premises................................. 35 (s) Building Codes...................................... 36 (t) Exhibits and Addendum............................... 36 ARTICLE 31 - Option to Renew..................................... 36 (a) Option Right........................................ 36 (b) Option Rent......................................... 36 (c) Exercise of Options................................. 36 ii

(d) Determination of Market Rent........................ 37 ARTICLE 32 - Right of First Offer/Right of First Refusal......... 37 (a) Right of First Offer................................ 37 (b) Right of First Refusal.............................. 38 ARTICLE 33 - Storage Space....................................... 40 ARTICLE 34 - Signage/Directory................................... 40 ARTICLE 35 - Option to Cancel.................................... 40 ARTICLE 36 - Building Antenna(s) or Satellite Dish(es)........... 41 ARTICLE 37 - Limited Arbitration/Dispute Resolution Procedure.... 42 Addendum [_] Yes [X] No Exhibit "A" Premises Exhibit "B" Rules and Regulations Exhibit "C" Notice of Lease Term Dates and Tenant's Percentage iii

STANDARD OFFICE LEASE This standard Office Lease ("Lease") is made and entered into as of this 10th day of January, 1996, between LAOP IV, LLC, a Nevada limited liability company ("Landlord"), and SMARTALK TELESERVICES, INC., a California corporation ("Tenant"). Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises described as Suite No. 500, as designated on the plan attached hereto and incorporated herein as Exhibit "A" ("Premises"), of the project ("Project") now known as Westwood Terrace, whose address is 1640 Sepulveda Boulevard, Los Angeles, California 90025, for the term and upon the terms and conditions hereinafter set forth, and Landlord and Tenant hereby agree as follows: ARTICLE 1 - Basic Lease Provisions: ---------------------------------- A. Term: Commencement Date: On the later of (i) February 1, 1996, or (ii) up to five (5) business days after substantial completion of the tenant improvement work defined in Article 9 below to install Tenant's main "T-Switch"; provided, however, Tenant shall use its best efforts to install such switch prior to the expiration of said five (5) day period, and if Tenant does install said switch prior to the expiration of such five (5) day period the Lease shall commence on such earlier date. Substantial completion shall mean completion of "the Tenant Improvements" (defined in Article 9), punch-list items excluded, in accordance with the approved plans, and the final inspection by the City of Los Angeles has occurred. Upon Tenant's occupancy of the Premises, Landlord and Tenant agree to execute and deliver a Commencement Letter in a form substantially similar to that attached hereto as Exhibit "C." Tenant shall be allowed access to the Premises prior to the commencement of the Lease term (without a charge for rent), to ensure the Premises are properly furnished and special leasehold improvements, equipment, furniture, telephone and computer/data cabling is properly installed and operational; provided, Tenant shall not unreasonably interfere with any tenant improvement work to be done. If Tenant interferes with the tenant improvement work because of such early occupancy, the Commencement Date shall not be delayed but shall be started as of the date which would have occurred but for such Tenant interference. 1

Expiration Date: Seventy-two (72) months from the Commencement Date. B. Square Footage: Approximately 6,795 rentable square feet. C. Basic Rental: D. Base Year: 1996 E. Tenant's Proportionate Share: F. Security Deposit G. Permitted Use: General office use not inconsistent with the use in the Project or other first-class office projects in the area of the Project. H. Broker: First Property Realty Corporation; Prentiss Properties, Limited, Inc. I. Parking Passes: Tenant shall have the use of three (3) unreserved parking spaces for each 1,000 square feet contained in the Premises, which equals twenty (20) spaces. Four (4) of the twenty (20) spaces may be reserved spaces. Parking charges for such spaces shall be as set forth in Article 1.J., immediately below. J. Parking Charges: All parking provided in Article 1.1. above shall be at the prevailing monthly rate in effect at the beginning of each month during the term of this Lease, and any extensions or renewals thereof; provided, however, such charge during the Initial Lease term shall not exceed Ninety-Nine Dollars ($99.00) a space each month (including all applicable taxes) for each unreserved space or One Hundred Thirty-Two Dollars ($132.00) a space each month (including all applicable taxes) for each unreserved space. K. First Month's Rent: L. Consent: Whenever the consent of either Landlord or Tenant is required hereunder, the party giving such consent shall not unreasonably withhold or delay the giving of such consent. 2

ARTICLE 2 - Term ---------------- The term of this Lease shall commence on the Commencement Date (the "Commencement Date") as set forth in Article l.A. of the Basic Lease Provisions, and shall end on the expiration date set forth in Article l.A. of the Basic Lease Provisions. If Landlord is unable to deliver possession of the Premises to Tenant on or before the Commencement Date, Landlord shall not be subject to any liability for its failure to do so, and such failure shall not affect the validity of this Lease nor the obligations of Tenant hereunder, but the term hereof shall commence on the earlier of (a) the day that Landlord gives Tenant written notice that the Premises are ready for occupancy or (b) on the day that Tenant first occupies the Premises, and the expiration of the term hereof shall be extended accordingly. In the event that the Substantial Completion of the Premises has not occurred by the "Outside Date", which shall be July 1, 1996, and as such the July 1, 1996 date may be extended by the number of days of tenant delays (as defined below), then the sole remedy of Tenant shall U the right to deliver a notice to Landlord ("Termination Notice") electing to terminate this Lease effective upon receipt of the Termination Notice by Landlord ("Effective Date"). The Termination Notice must be delivered by Tenant to Landlord, if at all, not earlier than the Outside Date and not later than five (5) business days after the Outside Date. ARTICLE 3 - Rental ------------------ (a) BASIC RENTAL. Tenant agrees to pay to Landlord during the term hereof, at Landlord's office or to such other person or at such other place as directed from time to time by written notice to Tenant from Landlord, the initial monthly and annual sums as set forth in Article 1.C of the Basic Lease Provisions, payable in advance on the first day of each calendar month, without demand, setoff or deduction, and in the event this Lease commences or the date of expiration of this Lease occurs other than on the first day or last day of a calendar month, the rent of such month shall be prorated. Notwithstanding the foregoing, the first month's rent shall be paid to Landlord in accordance with Article 1.K. of the Basic Lease provisions. Basic Rental shall be subject to increase from time to time pursuant to the subsequent provisions this Article 3, or other articles of this Lease and any Addendum (if applicable) incorporated herein. (b) INCREASE IN DIRECT COSTS. The term "Base Year" means the calendar year set forth in Article l.D. of the Basic Lease Provisions. If, in any calendar year during the term of this Lease, the "direct costs" (as hereinafter defined) paid or incurred by Landlord shall be higher than the direct costs for the Base Year, Tenant shall pay an additional sum for such and each subsequent calendar year equal to the product of the amount set forth in Article 1.E. of the Basic Lease Provisions multiplied by such increased amount of "direct costs." In the event either the Premises and/or the Project is expanded or reduced, then Tenant's proportionate share shall be appropriately adjusted, and as to the calendar year in which such change occurs, Tenant's proportionate share for such year shall be determined on the basis of the number of days during that particular calendar year that such Tenant's proportionate share was in effect. In the event this Lease shall terminate on any date other than the last day of A calendar year, the additional sum payable hereunder by Tenant during the calendar year in which this Lease terminates shall be prorated on the basis of the relationship which the number of days which have elapsed from the commencement of said calendar year to and including said date on which this Lease 3

terminates bears to three hundred sixty (360). Any and all amounts due and payable by Tenant pursuant to Article 3(b), (c) and (d) hereof shall be deemed "Additional Rent" and Landlord shall be entitled to exercise the same rights and remedies upon default in these payments as Landlord is entitled to exercise with respect to defaults in monthly Basic Rental payments. (c) DEFINITIONS. As used herein the term "direct costs" shall mean the sum of the following: (i) "Tax Costs," which shall mean any and all real estate taxes and other similar charges on real property or improvements, assessments, water and sewer charges, and all other charges assessed, reassessed or levied upon the Project and appurtenances thereto and the parking or other facilities thereof, or the real property (the "Property") thereunder (collectively the "Real Property") or attributable thereto or on the rents, issues, profits or income received or derived therefrom which axe assessed, reassessed or levied by the United States, the state of California or any local government authority or agency or any political subdivision thereof, and shall include Landlord's reasonable legal fees, costs and disbursements incurred in connection with proceedings for reduction of Tax Costs or any part thereof (but only to the extent Landlord reasonably expects to receive a reduction of Tax Costs); provided, however, if at any time after the date of this Lease the methods of taxation now prevailing shall be altered so that in lieu of or as a supplement to or a substitute for the whole or any part of any Tax Costs, there shall be assessed, reassessed or levied (a) a tax, assessment, reassessment, levy, imposition or charge wholly or partially as a net income, capital or franchise levy or otherwise on the rents, issues, profits or income derived therefrom, or (b) a tax, assessment, reassessment, levy (including but not limited to any municipal, state or federal levy), imposition or charge measured by or based in whole or in part upon the Real Property and imposed upon Landlord, or (c) a license fee measured by the rent payable under this Lease, then all such taxes, assessments, reassessments or levies or the part thereof so measured or based, shall be deemed to be included in the term "direct costs." Notwithstanding the foregoing, Tax Costs shall not include excess profits, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes and federal and state income taxes. Any increase in Tax Costs as a result of the sale of the Project in 1995 which is paid, assessed or which accrues during the Base Year shall be included in Tax Costs for the Base Year. Notwithstanding anything to the contrary set forth in this Article 3(c)(i), any Tax Cost increase resulting from the sale or transfer of the Project after the execution of this Lease which results in a reassessment of the Project for tax purposes shall not be included in computations for payment of increases of direct costs during the first three (3) years of the initial Lease term. (ii) "Operating Costs," which shall mean all costs and expenses incurred by Landlord in connection with the maintenance, operation, replacement, ownership (as set forth herein) and repair of the Project, the equipment, the intrabuilding network cable, adjacent walks, malls and landscaped and common areas and the parking structure, areas and facilities of the Project, including, but not limited to, salaries, wages, medical, surgical and general welfare benefits and pension payments, payroll taxes, fringe benefits, employment taxes, workers' compensation, uniforms and dry cleaning thereof for all persons who perform duties connected with the operation, maintenance and repair of the Project, its equipment the intrabuilding network cable and the adjacent walks and landscaped areas, including janitorial, gardening, security , parking, operating engineer, elevator, painting, plumbing, electrical, carpentry, heating, 4

ventilation, air conditioning, window washing, hired services, a reasonable allowance for depreciation of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Project, accountant's fees incurred in the preparation of rent adjustment statements, legal fees, real estate tax consulting fees, personal property taxes on property used in the maintenance and operation of the Project, gross receipts tax imposed by the City of Los Angeles, capital expenditures incurred to effect economies of operation (but only to the extent Landlord reasonably expects to receive a savings effect from such capital expenditures) and capital expenditures required by government regulations, laws, or ordinances, and the cost of all charges for electricity, gas, water and other utilities furnished to the Project, including any taxes thereon; the cost of all charges for fire and extended coverage, liability and all other insurance for the Project carried by Landlord (provided, however, if Landlord acquires additional insurance, then Landlord shall recalculate the Base Year to take into account the cost of such additional insurance as if the same had been an operating Cost in existence at the time the Base Year was determined); the cost of all building and cleaning supplies and materials; the cost of all charges for cleaning, maintenance and service contracts and other services with independent contractors (including property management fees); and license, permit and inspection fees relating to the Project. In the event, during any calendar year, the Project is less than ninety-five percent (95%) occupied at all times, the operating Costs shall be adjusted to reflect the operating costs of the Project as though ninety-five percent (95%) were occupied at all times, and the Increase or decrease in the sums owed hereunder shall be based upon such operating costs as so adjusted. Operating Costs shall also include all management fees (provided, however, the Base Year Management fees shall be determined based on the percentage described in Subsection (c)(ii)(k) immediately below) and administrative fees. Notwithstanding the foregoing, for purposes of this Lease, Operating Costs and Tax Costs shall not, however, include: (a) Costs, including marketing costs, legal fees, space planner's fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or leasing of the Project, and costs, including permit, license and inspection costs, incurred with respect to the installation of tenant improvements made for new tenants in the Project or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Project (excluding, however, such costs relating to any common areas of the Project or parking facilities); (b) Depreciation, interest and principal payments on mortgage and other debt costs, if any, penalties and interest, costs of all capital items (except as set forth in (c)(ii) above with respect to economies of operation and governmental compliance)f including without limitation, repairs, replacements and alterations, and costs of capital improvements and equipment; (c) Costs for which Landlord is reimbursed by any tenant or occupant of the Project or by insurance by its carrier or any tenant's carrier, and electric power costs for which any tenant directly contracts with the local public service company; 5

(d) Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project; (e) The wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are prorated to reflect time spent on maintaining, operating or managing the Project vis-a-vis time spent on matters unrelated to maintaining, operating or managing the Project; provided, that in no event shall Operating Costs for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Project Manager or Project Engineer (and allocated costs of Landlord's Asset Supervisor); (f) Amount as ground rental for the Project by the Landlord; (g) Except for a Project management fee to the extent allowed pursuant to Subparagraph (c)(ii)(k) below, overhead and profit increment paid to the Landlord or to subsidiaries or affiliates of the Landlord for services in the Project to the extent the same exceeds the costs of such services rendered by unaffiliated third parties on a competitive basis; (h) Any compensation, including wages, benefits and bonuses paid to clerks, attendants or other persons in commercial concessions (except parking) operated by the Landlord; (i) Rentals and other related expenses incurred in leasing air conditioning systems, elevators or other equipment which if purchased the cost of which would be excluded from Operating Costs as a capital cost, except equipment not affixed to the Project which is used in providing janitorial or similar services and, further excepting from this exclusion such equipment rented or leased to remedy or ameliorate an emergency condition in the Project; (j) Costs, other than those incurred in ordinary maintenance and repair, for sculpture, painting, fountains or other objects or art; (k) Fees payable by landlord for management of the Project in excess of five percent (5%) of Landlord's gross rental revenues, adjusted and grossed up to reflect a one hundred percent (100%) occupancy of the Project with all tenants paying rent, including base rent, pass-throughs and parking fees (but excluding the cost of after-hours services or utilities) from the Project for any calendar year or portion thereof; (1) Any costs expressly excluded from Operating costs elsewhere under this Lease; (m) Rent for any space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the comparable buildings in the vicinity of the Project, with adjustment where appropriate for the size of the applicable project; 6

(n) Costs arising from Landlord's charitable or political contributions; (o) costs arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services, and costs arising from legal proceedings against other tenants or occupants of the Project, or prospective occupants of the Project; (p) Costs of advertising and promotion; (q) Except as set forth in Article 28 below, costs incurred to comply with laws relating to the removal of hazardous material (as defined under applicable law) and asbestos or asbestos containing material (collectively, "Hazardous Material") which was in existence in or on the Project prior to the Lease Commencement Date, and was of such a nature that a federal, state or municipal governmental authorities, if it had then had knowledge of the presence of such Hazardous Material, in the state, and under the conditions that then existed in or on the Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto; and costs incurred to remove, remedy, contain or treat Hazardous Material, which Hazardous Material is brought into or onto the Project after the date hereof by Landlord and is of such a nature, at that time, that a federal, state or municipal governmental authority, if it had then had knowledge of the presence of such Hazardous Material in the state and under the conditions that then exists in the building or on the Project, would have then required the removal of such Hazardous Material or other remedial or containment action with respect thereto; (r) Any bad debt loss, rent loss, or reserves; (s) Costs of seismic inspection and testing required pursuant to statutes, codes or ordinances in effect and as enacted prior to the Lease Commencement Date; and (t) costs for capital improvements to comply with the requirements of the Americans with Disabilities Act as enacted as of the execution of this Lease. (d) DETERMINATION OF PAYMENT. (i) At any time following the end of calendar year 1996, but not more often than once (excepting therefrom adjusted billings) during each calendar year, commencing with the present calendar year, Landlord shall furnish to Tenant a written statement showing in reasonable detail Landlord's direct costs for the Base Year and for the calendar year preceding the year in which such statement is furnished, and showing the amount, if any, of any increase or decrease in the sums due from Tenant for such calendar year. The failure of Landlord to so furnish said statement shall not constitute a default by Landlord hereunder or a waiver of Landlord's right to any adjustment provided for hereunder. (ii) On the monthly rental payment date which next occurs thirty (30) days after Tenant's receipt of such statement Tenant shall pay to Landlord an amount equal to the sum of (a) the amount shown in said statement as being due from Tenant (less any amounts paid by 7

Tenant on account therefrom during such previous calendar year) and (b) one twelfth (1/12th) of said amount multiplied by the number of rental payment dates having elapsed during the current calendar year, to be applied on account of Tenant's proportionate share of the increase in direct costs for the then present calendar year. The monthly rental payment then due and subsequent monthly rental payments during the then current calendar year shall be increased by one-twelfth (1/12th) of Tenant's Proportionate Share of the increase in direct costs for the preceding calendar year over the Base Year direct costs. In the case of the decrease in direct costs, any overpayment by Tenant shall be credited against the next rent payment falling due. (iii) In the event Tenant disputes Landlord's calculation of any Additional Rent due hereunder for a given Lease year, Tenant shall, only once for each lease year, have the right within one hundred eighty (180) days of receipt of the yearly reconciliation provided to Tenant from Landlord, after reasonable notice and at reasonable times, to inspect Landlord's accounting records at Landlord's accounting office and if, after such inspection, Tenant still disputes such Additional Rent, a certification as to the proper amount shall be made by a nationally recognized accounting firm (who is paid on an hourly or flat-fee basis and not a contingency or commission basis) selected by Tenant and approved by Landlord. Tenant agrees to pay the cost of such certification unless it is subsequently determined that Landlord's original statement was in error to Tenant's disadvantage by more than five percent (5%) of the direct costs. As a condition precedent to its exercise of its rights of dispute aforesaid, Tenant shall timely pay to Landlord all amounts set forth in the statement which Tenant wishes to dispute. No audit may be conducted by Tenant if any other tenant of the Project has notified Landlord of its intention to perform an audit and timely performs the same. If Tenant requests an audit and another tenant of the Project has previously notified Landlord of its intention to audit, then Landlord agrees to furnish to Tenant a copy of the results of such other audit. No audit shall be conducted if Tenant is in default under any provision of this Lease, including, but not limited to, timely payment of any amount due pursuant to the actual statement. Tenant shall deliver to Landlord a copy of the results of an audit within fifteen (15) days of its receipt by Tenant. If an audit indicates an over-billing, Tenant may submit a claim for the over-billed amount to Landlord, detailing the nature of the over-billing, and Landlord shall have sixty (60) days to pay such amount or contest the claim by giving notice thereof to Tenant, detailing the nature of Landlord's contest of Tenant's claims. If Landlord contests the claim, either Landlord or Tenant may submit the claim to arbitration in accordance with the dispute resolution procedures set forth by the American Arbitration Association (or similar successor entity) for such matters. If the arbitration discloses that the actual statement is more than five percent (5%) overstated, Landlord shall, within thirty (30) days of the date of decision by the Arbitrator, pay to Tenant the amount of any over-billing. If the Arbitrator determines that the actual statement is understated, Tenant shall, within thirty (30) days of the date of the Arbitrator's decision pay to Landlord the amount of the underbilling so determined. Except as provided in this Article 3, Tenant shall keep all information gained in connection with any audit confidential. Tenant shall not disclose any information gained in connection with any audit to third parties except to those who must receive the information in order to carry out the purpose of this Article 3, and agree in writing to keep the information 8

confidential. Failure to observe the provision of this confidentiality requirement shall be deemed a material default under the Lease. (iv) Landlord shall have the right, prior to the commencement of each calendar year during the term hereof during which Tenant's obligation may adjusted under this Article 3, to furnish to Tenant a written estimate showing in reasonable detail Landlord's estimated direct costs for the next following calendar year and the amount of Tenant's proportionate share of increase in direct costs over the Base Year direct costs appropriately prorated on a monthly basis. Thereafter, the monthly rent adjustment payments becoming due hereunder shall be in the amounts set forth in said written estimate. Neither Landlord's failure to deliver nor the late delivery of such estimate shall constitute a default by Landlord hereunder or a waiver of Landlord's right to any rent or other-adjustment provided for herein. Within one hundred twenty (120) calendar days following the close of each calendar year during the term hereof, Landlord will furnish to Tenant a written statement (the "Reconciliation") showing in reasonable detail Landlord's actual direct costs for the relevant calendar year, together with a full statement of any adjustments necessary to reconcile any sums paid (or credited) hereunder as an estimated amount of Tenant's Proportionate Share of direct costs during such calendar year with those sums actually payable and due hereunder for such calendar year as set forth in the Reconciliation. If the Reconciliation shows that additional sums are due from Tenant hereunder, Tenant shall pay such sums to Landlord within thirty (30) days of receipt of the Reconciliation. If the Reconciliation shows that a credit is due Tenant, such credit shall be credited against the next sums becoming due from Tenant hereunder. Notwithstanding that the term of this Lease has expired and Tenant has vacated the Premises, Tenant shall pay to Landlord any additional sums due Landlord and Landlord shall rebate to Tenant the amount of any credit due Tenant, as set forth in the Reconciliation for the year in which the Lease term expired. Even though the term of this Lease has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's share of Tax Costs and operating Costs for the year in which this Lease terminated, Tenant shall pay any increase due over the estimated amounts paid. The terms of this Article 3(d)(iv) shall survive the expiration or earlier termination of the Lease Term (including any and all option periods, if applicable). ARTICLE 4 - Security Deposit ---------------------------- Tenant has deposited with Landlord the sum set forth in Article 1.F. of the Basic Lease Provisions as security for the full and faithful performance of every provision of this Lease to be performed by Tenant. If Tenant breaches any provision of this Lease, including but not limited to that payment of rent, Landlord may, following the expiration of any grace or n ice period, use all or any part of this security deposit for the payment of any rent or any other sums in default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of said deposit is so used or applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the security deposit to amount then required in Article 1.F. of the Basic Lease Provisions. Tenant agrees that Landlord shall not be required to keep this security deposit in trust, segregate it or keep it separate from Landlord's general funds but Landlord may commingle the security deposit with its general funds and Tenant shall not be entitled to interest on such deposit. At the expiration of the Lease term, and provided there exists no default, following the expiration of any grace or notice period, by Tenant hereunder, the security deposit or any balance thereof shall 9

be returned to Tenant (or, at Landlord's option, to Tenant's assignee), provided that subsequent to the expiration of this Lease, Landlord may retain from said security deposit (a) any and all amounts permitted by California Civil Code (S)1950.7 or any successor or replacement statute; but not limited to this section. ARTICLE 5 - Holding Over ------------------------ Should Tenant, without Landlord's written consent, hold over after termination of this Lease, Tenant shall become a tenant from month to month, only upon each and all of the terms herein provided as may be applicable to a mouth-to-month tenancy, and any such holding over shall not constitute an extension of this Lease. During the first three (3) months of such holding over, Tenant shall pay on the first of each month, Monthly Basic Rental, all direct costs, and all other and additional rent due hereunder at the rate of one hundred twenty-five percent (25%) for such amounts in effect for the last month of the Lease term. After the first three (3) months of such holding-over period, Tenant shall pay Monthly Basic Rental at the rate of one hundred fifty percent (150%) of the Monthly Basic Rental in effect for the last month of the term of this Lease, in addition to, and not in lieu of, all other payments required to be made by Tenant hereunder, including but not limited to, Tenant's Proportionate Share of any increase in direct costs. If Tenant fails to surrender the Premises upon the expiration or termination of this Lease, Tenant hereby indemnifies and agrees to hold Landlord and any real estate broker and agent harmless from all costs, loss, expense or liability, including without limitation, costs, real estate brokers claims and attorney's fees. ARTICLE 6 - Personal Property Taxes ----------------------------------- Tenant shall pay, prior to delinquency, all taxes assessed against or levied upon fixtures, furnishings, equipment and all other personal property of Tenant located in the Premises. In the event any or all of Tenant's fixtures, furnishings, equipment and other personal property shall be assessed and taxed with property of Landlord, Tenant shall pay to Landlord its share of such taxes within ten (10) days after delivery to Tenant by Landlord of a statement in writing setting forth the amount of such taxes applicable to Tenant's property. Tenant shall pay directly to the party or entity entitled thereto all business license fees, gross receipts taxes and similar taxes and impositions which may from time to time be assessed against or levied upon Tenant, as and when the same become due and before delinquency. Notwithstanding anything to the contrary contained herein, any sums payable by Tenant under this Article 6 shall not be included in the computation of "Tax Costs." ARTICLE 7 - Use --------------- Tenant shall use and occupy the Premises only for the use set forth in Article 1.G. of the Basic Lease Provisions and shall not use or occupy the Premises or permit the same to be used or occupied for any other purpose without the prior written consent of Landlord, which Landlord consent may be given or withheld in its sole and absolute discretion, and Tenant agrees that it will use the Premises in such a manner so as not to unreasonably interfere with or infringe the rights of other tenants in the Project. Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental regulations or requirements now in force or which may hereafter be in force relating to or affecting (i) the manner of use or occupancy of the 10

Premises or the Project, and (ii) improvements installed or constructed in the Premises by or for the benefit of Tenant. Tenant shall not do or permit to be dome anything which would invalidate or increase the cost of any fire and extended coverage insurance policy covering the Project and/or the property located therein and Tenant shall comply with all rules, orders, regulations and requirements of any organization which sets out standards, requirements or recommendations commonly referred to by major fire insurance underwriters. Tenant shall promptly upon demand reimburse Landlord for any additional premium charges for any such insurance policy assessed or increased by reason of Tenant's failure to comply with the provisions of this Article. ARTICLE 8 - Condition of Premises --------------------------------- Tenant hereby agrees that the Premises shall be taken "as is", and Tenant hereby agrees and warrants that it has inspected the condition of the visible portion of the Premises and the suitability of same for Tenant's purposes, and Tenant does hereby waive and disclaim any objection to, cause action based upon, or claim that its obligations hereunder should be reduced or limited because of the condition of the visible portions of the Premises or the Project or the suitability of same for Tenant's purposes. The foregoing sentence notwithstanding, Landlord agrees to bear the cost for any latent structural defects in the Premises which are discovered by Tenant (and written notice is given to Landlord) during the first year of the Lease term only except to the extent set forth in this Lease, Tenant acknowledges that neither Landlord nor any agent nor any employee of Landlord has made any representations or warranty with respect to the Premises or the Project or with respect to the suitability of either for the conduct of Tenant's business. The taking of possession of the Premises by Tenant shall conclusively establish that the Premises and the Project were at such time in satisfactory condition, subject to punch list items if applicable. Tenant hereby waives Sections 1941 and 1942 of the Civil Code of California or any successor provision of law. Landlord reserves the right from time to time: (i) to install, use, maintain, repair, replace and relocate for service to the Premises and/or other parts of the Project pipes, ducts, conduits, wires, appurtenant fixtures, and mechanical systems, wherever located in the Premises or the Project, (ii) to alter, close or relocate any facility in the Premises or the Common Areas or otherwise conduct any of the above activities for the purpose of complying with a general plan for fire/life safety for the Project or otherwise and (iii) to comply with any federal, state or local law, rule or order with respect thereto or the regulation thereof not currently in effect. Landlord shall attempt to perform any such work with the least inconvenience to Tenant as possible (including the performance of same during after hours), but in no event shall Tenant be permitted to withhold or reduce Basic Rent or other charges due hereunder as a result of same or otherwise make claim against Landlord for interruption or interference with Tenant's business and/or operations or for any other reason whatsoever unless the work materially interferes with the operation of Tenant's business. Landlord agrees, at its sole cost and expense, to thoroughly clean the Premises immediately prior to Tenant's occupancy and immediately after Tenant has moved in and "set-up" the Premises. 11

ARTICLE 9 - Repairs and Alterations ----------------------------------- Tenant shall keep the Premises in good condition and repair, except for damage caused by ordinary wear and tear, or caused by Landlord, its agents, representatives, employees or contractors or otherwise beyond the reasonable control of Tenant (provided, however, such exclusion shall not exclude damage caused by Tenant or Tenant's employees, invitees, agents and the like). All damage or injury to the Premises or the Project caused by the act or negligence of Tenant, its employees, agents or visitors, guests, invitees or licensees or by the use of the Premises shall be promptly repaired by Tenant, at its sole cost and expense (except to the extent Landlord has responsibility for same under this Lease.), to the satisfaction of Landlord; provided, however, that for damage to the Project, Landlord shall have the right (but not the obligation) to select the contractor and oversee all such repairs. Landlord may make any repairs which are not promptly made by Tenant after Tenant's receipt of written notice and the reasonable opportunity of Tenant to make said repair within five (5) business days from receipt of said written notice, and charge Tenant for the cost thereof, which cost shall be paid by Tenant within five (5) days from invoice from Landlord. Tenant shall be responsible for the design and function of all nonstandard improvements of the Premises, whether or not installed by Landlord at Tenant's request. Tenant waives all rights to make repairs at the expense of Landlord, or to deduct the cost thereof from the rent. Tenant shall make no alterations, changes or additions in or to the Premises without Landlord's prior written consent, and then only by contractors or mechanics approved by Landlord in writing and upon the approval by Landlord in writing of fully detailed and dimensioned plans and specifications pertaining to the work in question, to be prepared and submitted by Tenant at its sole cost and expense. Tenant shall at its sole cost and expense obtain all necessary approvals and permits pertaining to any work approved by Landlord. If Landlord, in approving any work, specifies a reasonable commencement date therefor, Tenant shall not commence any work prior to such date. Tenant hereby indemnifies and agrees to hold Landlord free and harmless from all liens and claims of lien, and all other liability, claims and demands arising out of any work done or material supplied to the Premises by or at the request of Tenant. If permitted alterations, changes, or additions are made, they shall be made at Tenant's sole cost and expense and shall be and become the property of Landlord, except that Landlord may, by written notice to Tenant given at the time of approval of such work, require Tenant it Tenant's expense to remove all partitions, counters, i and the like installed by Tenant (excluding the Tenant Improvements as defined below), and to repair any damages to the Premises caused by such removal. With regard to repairs, alterations or any other work (excluding the Tenant Improvements) arising from or related to this Article 9 which Tenant requests Landlord to complete, Landlord shall be entitled to receive an administrative/supervision fee of fifteen percent (15%) of the total cost of all (i) work performed; (ii) materials, plans and drawings furnished; and (iii) all other costs and expenses related to such repairs, alterations or other work. below, Tenant shall also pay for any required metering system for such unit(s) and shall pay for any and all utility charges to operate the unit(s). Notwithstanding anything to the contrary contained in this Lease, the contractor(s) and subcontractors constructing the Tenant Improvements shall receive free on-site parking during construction of the Tenant Improvements, and Tenant shall not be charged for the use of freight elevators, loading docks, utilities or temporary HVAC during the construction of the Tenant Improvements. 12

ARTICLE 10 - Liens ------------------ Tenant shall keep the Premises and the Project free from any mechanics' liens, vendors liens or any other liens arising out of any work performed, materials furnished or obligations incurred by Tenant, and agrees to defend, indemnify and hold harmless Landlord from and against any such lien or claim or action thereon, together with costs of suit and reasonable attorneys, fees incurred by Landlord in connection with any such claim or action. Before commencing any work of alteration, addition or improvement (other than the Tenant Improvements) to the Premises, Tenant shall give Landlord at least ten (10) business days' written notice of the proposed commencement of such work (to afford Landlord an opportunity to post appropriate notices of non- responsibility). In the event that there shall be recorded against the Premises or the Project or the property of which the Premises is a part any claim or lien arising out of any such work performed, materials furnished or obligations incurred by Tenant and such claim or lien shall not be removed or discharged within ten (10) days of filing, Landlord shall have the right but not the obligation to pay and discharge said lien without regard to whether such lien shall be lawful or correct or to require that Tenant deposit with Landlord in cash, lawful money of the United States, one hundred fifty percent (150%) of the amount of such claim, which sum may be retained by Landlord until such claim shall have been removed of record or until judgment shall have been rendered on such claim and such judgment shall have become final, at which time Landlord shall have the right to apply such deposit in discharge of the judgment on said claim and any costs, including attorneys' fees incurred by Landlord, and shall remit the balance thereof to Tenant. ARTICLE 11 - Project Services ----------------------------- (a) Landlord agrees to furnish to the Premises, at a cost to be included in Operating Costs, from 8:00 a.m. to 6:00 p.m. Mondays through Fridays and 9:00 a.m. to 1:00 p.m. on Saturdays, excepting local and national holidays, air conditioning and heat, electric current for normal lighting and fractional horsepower for office machines, elevator service and water on the same floor as the Premises, for lavatory and drinking purposes, all in such reasonable quantities as in the judgment of Landlord is reasonably necessary for the comfortable occupancy of the Premises and otherwise consistent with the amounts furnished by landlords of similar office buildings in West Los Angeles. Janitorial and maintenance services shall be furnished five (5) days a week, excepting local and national holidays. Tenant shall comply with all non- discriminatory rules and regulations which Landlord may reasonable establish for the proper functioning and protection of the common area air conditioning, heating, elevator, electrical intrabuilding network cable and plumbing systems. Landlord shall enforce said rules and regulations on a non-discriminatory basis. Landlord shall not be liable for, and there shall be no rent abatement as a result of, any stoppage, reduction or interruption of any such services caused by governmental rules, regulations or ordinances, riot, strike, labor disputes, breakdowns, accidents, necessary repairs or other cause. Except as specifically provided in this Article 11, Tenant agrees to pay for all utilities and other services utilized by Tenant for all overtime or additional building services furnished to Tenant not uniformly furnished to all tenants of the Project at Landlord's actual expense. (b) Tenant will not, without the prior written consent of Landlord, use any apparatus or device in the Premises, including without limitation electronic data processing machines, 13

computer or video equipment or other machines or equipment, using current in excess of 110 volts, which will in any way increase the amount of electricity or water usually furnished or supplied for use of the Premises as general office space; nor connect any apparatus, machine or device with water pipes or electric current (except through existing electrical outlets in the Premises), for the purpose of using electric current or water. Nothing contained in this subsection (b) is intended to restrict Tenant from using equipment and other machines which are deemed to be standard in first-class office buildings in West Los Angeles. (c) If Tenant shall require electric current in excess of that which Landlord is obligated to furnish under Article 11(a) and (b) above, Tenant shall first obtain the written consent of Landlord, which Landlord may refuse in its reasonable discretion, to the use thereof and Landlord may cause an electric current meter to be installed in the Premises to measure the amount of electric current consumed for any such other use. The cost of any such meter and of installation, maintenance and repair thereof shall be paid for by Tenant so long as such consumption by Tenant is in excess of that uniformly furnished to all tenants at Landlord's expense, and Tenant agrees to pay to Landlord, promptly upon demand therefor by Landlord, for all such excess electric current consumed by any such use as shown by said meter at the rates charged for such service by the City in which the Project is located or the local Public Utility, as the case may be, furnishing the same, plus any additional expense incurred by Landlord in keeping account of the electric current so consumed. (d) If any lights, machines or equipment (including but not limited to computers) are used by Tenant in the Premises in amounts beyond the standard found in first-class office buildings in West Los Angeles and which materially affect the temperature otherwise maintained by the air conditioning system, or generate substantially more heat in the Premises than would be generated by the building standard lights and usual fractional horsepower office equipment, Landlord shall have the right to install any machinery and equipment which Landlord reasonably deems necessary to restore temperature balance, including but not limited to modifications to the standard air conditioning equipment, and the cost thereof, including the cost of installation and any additional cost of operation and maintenance occasioned thereby, shall be paid by Tenant to Landlord upon demand by Landlord. Landlord shall not be liable under any circumstances for loss of or injury to properly, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing, [unless such failure was within Landlord's actual control to prevent.] (e) If Tenant requires heating, ventilation and/or air conditioning during times other than the times provided in Article 11(a) above, Tenant shall give Landlord such advance notice as Landlord shall reasonably require and shall pay Landlord's actual cost for the use of such equipment with a two (2) hour minimum provided, however, the cost for the use f such equipment shall not exceed, during the Lease term, Sixty-Five Dollars ($65.00) for each hour. (f) Landlord, at its sole cost and expense, shall hire a security service company for the Project, which company shall also provide after-hours escort service to the Project's parking structure for Tenant's employees and visitors. Landlord makes no representations as to the type and level of security or quality of the company's employees. Tenant specifically agrees that the security is for the Project and is not a full-time service to guard the parking structure or the Premises. 14

(g) In the event that Tenant is prevented from using the Premises or any portion thereof as a result of any failure of Landlord to provide utilities, services or access to the Premises or the Project, or there exists a hazardous material in the Premises (not brought into the Premises by Tenant or any party under Tenant's control, including employees, invitees, customers and the like) which by law prevents Tenant from using the Premises, then Tenant shall promptly give Landlord notice thereof ("Tenant's Notice"). Notwithstanding anything to the contrary contained in this Lease, in the event that Tenant prevented from using the Premises or any portion thereof as a result of such a failure for a period of five (5) consecutive business days following the date Landlord receives Tenant's Notice ("Notice Date"), all of Tenant's rents (and escalations thereto) shall be abated or reduced, as the case may be, in the proportion that the rentable area of the portion of the Premises that the Tenant is prevented from using bears to the total rentable area of the Premises, during the period after the Notice Date that Tenant is prevented from conducting its business from the Premises or portion of the Premises. However, in the event that Tenant is prevented from conducting its business in any portion of the Premises and the remaining portion of the Premises is not sufficient to allow Tenant to efficiently conduct its business therein, and if Tenant does not conduct its business-from such remaining portion, then all of the rents for the entire Premises shall be abated during said period. Provided, however, that if Tenant is prevented from using the Premises and Tenant reoccupies and conducts its business from any portion of the Premises during such period, the rents allocable to such reoccupied portion, based upon the proportion which the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date such business operation commences. ARTICLE 12 - Rights of Landlord ------------------------------- Landlord and its agents shall have the right to enter the Premises at all reasonable times for the purpose of cleaning the Premises, examining or inspecting the same, serving or posting and keeping posted thereon notice's as provided by law, or which Landlord deems necessary for the protection of Landlord or the Property, showing the same to prospective tenants or purchasers of the Project, in the case of an emergency, and for making such alterations, repairs, improvements or additions to the Premises or to the Project as Landlord may deem necessary or desirable. If Tenant shall not be personally present to open and permit an entry into the Premises at any time when such an entry by Landlord is necessary or permitted hereunder, Landlord may enter by means of a master key or may enter forcibly, only in the case of an emergency, without liability to Tenant except for any failure to exercise due care for Tenant's property, and without-affecting this Lease. Any such entry by Landlord shall be conducted at such times as is reasonably necessary under the circumstances to cause the least amount of disruption to Tenant's business. ARTICLE 13 - Indemnity; Exemption of Landlord from Liability ------------------------------------------------------------ (a) INDEMNITY. Tenant shall indemnify, defend and hold Landlord harmless from any and all claims arising from Tenant's use of the Premises or the Project (including Tenant's Signage rights set forth in Article 34) or from the conduct of its business or from any activity, work or thing which may be permitted or suffered by Tenant in or about the Premises or the Project and shall further indemnify, defend and hold Landlord harmless from and against any and all claims arising from any breach or default in the performance of any obligation on 15

Tenant's part to be performed under this Lease or arising from any negligence of Tenant or any of its agents, contractors, employees or invitees, patrons or customers in or about the Project and from any and all costs, attorneys' fees, expenses and liabilities incurred in the defense of any claim or any action or proceeding brought thereon, including negotiations in connection therewith. Tenant hereby assumes all risk of damage to property or injury to persons in or about the Premises from any cause, and Tenant hereby waives all claims in respect thereof against Landlord, excepting where the damage is caused by the gross negligence or willful misconduct of Landlord and is not covered by Tenant's insurance. (b) EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be liable for injury to Tenant's business, or loss of income therefrom, or for damage that may be sustained by the person, goods, wares, merchandise or property of Tenant, its employees, invitees, customers, agents, or contractors, or any other person in, on or about the Premises directly or indirectly caused by or resulting from fire, steam, electricity, gas, water, or rain which may leak or flow from or into any part of the Premises, or from the breakage , leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, light fixtures, or mechanical or electrical systems or from intrabuilding network cable, whether such damage or injury results from conditions arising upon the Premises or upon other portions of the Project or from other sources or places and regardless of whether the cause of such damage or injury or the means or repairing the same is inaccessible to Tenant, except in connection with damage or injury resulting from the gross negligence or willful misconduct of Landlord, or its authorized agents. Landlord shall not be liable to Tenant for any damages arising from any act or neglect of any other tenant of the building. ARTICLE 14 - Insurance ---------------------- (a) TENANT'S INSURANCE. Tenant, shall at all times during the term of this Lease, and at its own cost and expense, procure and continue in force the following insurance coverage: (i) Commercial General Liability Insurance with a combined single limit for bodily injury and property damages of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the annual aggregate, including products liability coverage if applicable, covering the insuring provisions of this Lease and the performance of Tenant of the indemnity and exemption of Landlord from liability agreements set forth in Article 13 hereof; (ii) a policy of standard fire, extended coverage and special extended coverage insurance (all risks), including a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage where sprinklers are provided in an amount equal to the full replacement value new without deduction for depreciation of all equipment, fixtures and furniture installed by or at the expense of Tenant; and (iii) insurance for all telecommunications equipment and intrabuilding network for which Tenant is responsible. Tenant shall carry and maintain during the entire Lease term (including any option periods, if applicable), at Tenant's sole cost and expense, increased amounts of the insurance required to be carried by Tenant pursuant to this Article 14 and such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be reasonably required by Landlord, so long as such requirement is consistent with the requirements of other landlords of first-class office buildings in West Los Angeles, or required by Landlord's lender. 16

(b) FORM OF POLICIES. The aforementioned minimum limits of policies and Tenant's procurement and maintenance thereof shall in no event limit the liability of Tenant hereunder. Such insurance shall name Landlord and such other persons or firms with insurable interests, as Landlord specifies from time to time, as additional insureds' with an appropriate endorsement to the policy(s) and shall be with companies having a rating of not less than A-VIII in Best's Insurance Guide. Tenant shall furnish to Landlord, from the insurance companies, or cause the insurance companies to furnish, certificates of coverage. No such policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after thirty (30) days prior written notice to Landlord by the insurer. All such policies shall be endorsed to agree that Tenant's policy is primary and that any insurance covered by Landlord is excess and not contributing with any Tenant insurance requirement hereunder. Tenant shall, at least twenty (20) days prior to the expiration of such policies, furnish Landlord with renewals or binders. Tenant agrees that if Tenant does not take out and maintain such insurance or furnish Landlord with renewals or binders, Landlord may (but shall not be required to) procure said insurance on Tenant's behalf and charge Tenant the cost thereof, which amount shall be payable by Tenant upon demand with interest from the date such sums are extended. Tenant shall have the right to provide such insurance coverage, pursuant to blanket policies obtained by Tenant, provided such blanket policies expressly afford coverage to the Premises and to Tenant as required by this Lease. (c) LANDLORD'S INSURANCE. Landlord shall, as a cost to be included in Operating Costs, procure and maintain at all times during the term of this Lease, a policy or policies of insurance covering loss or damage to the Project (including the Tenant Improvements, but excluding Tenant's personal property, equipment, fixtures, and the like) in the amount of the full replacement costs without deduction for depreciation thereof (exclusive of Tenant's trade fixtures, inventory, personal property and equipment); providing protection against all perils included within the classification of fire and extended coverage, vandalism coverage and malicious mischief, sprinkler leakage, water damage, and special extended coverage on building. Additionally, Landlord may (but shall not be required to) carry: (i Bodily Injury and Property Damage Liability Insurance and/or Excess Liability Coverage insurance; and (ii) Earthquake and/or Flood Damage insurance; and (iii) Rental Income Insurance at its election or if required by its lender from time to time during the term hereof, in such amounts and with such limits as Landlord or its lender may deem appropriate. The costs of such insurance shall be included in operating Costs. (d) WAIVER OF SUBROGATION. Tenant releases Landlord (and its respective authorized representatives) and Landlord releases Tenant (and its respective authorized representatives) from any claims for damage to any person or the Premises, and to the fixtures, personal property, improvements, and alterations of either Landlord or Tenant, in or on the Premises, and the Project, that are caused by or result from risks insured against under any insurance policies carried by either Tenant or Landlord and in force at the time of any such damage. (e) COMPLIANCE WITH LAW. Tenant agrees that it will not, at any time, during the term of this Lease, carry any stock of goods or do anything in or about the Premises that will in any way tend to increase the insurance rates upon the Project. Tenant agrees to pay Landlord forthwith upon demand the amount of any increase in premiums for insurance against loss by fire 17

that may be charged during the term of this Lease on the amount of insurance to be carried by Landlord on the Project resulting from the foregoing, or from Tenant doing any act in or about said Premises that does so increase the insurance rates, whether or not Landlord shall have consented to such act on the part of Tenant. If Tenant installs upon the Premises any electrical equipment which constitutes an overload of electrical lines of the Premises, Tenant shall at its own cost and expense in accordance with all other Lease provisions, and subject to the provisions of Article 9, 10 and 11, hereof, make whatever changes are necessary to comply with requirements of the insurance underwriters and any governmental authority having Jurisdiction thereover, but nothing herein contained shall be deemed to constitute Landlord's consent to such overloading. Tenant shall, at its own expense, comply with all requirements of the insurance authority having jurisdiction over the Project necessary for the maintenance of reasonable fire and extended coverage insurance for the Premises, including without limitation thereto, the installation of fire extinguishers or an automatic dry chemical extinguishing system. ARTICLE 15 - Assignment and Subletting -------------------------------------- Tenant shall have no power to, either voluntarily, involuntarily, by operation of law or otherwise, sell, assign, transfer or hypothecate this Lease, or sublet the Premises or any part thereof, or permit the Premises or any part thereof to be used or occupied by anyone other than Tenant or Tenant's employees without the prior written consent of Landlord which consent shall not be unreasonably withheld. If Tenant is a corporation, unincorporated association or partnership, the sale, assignment, transfer or hypothecation of any class of stock or other ownership interest in such corporation, association or partnership in excess of twenty-five percent (25%) in the aggregate ("Internal Transfer") shall meet the transfer provisions of Subsection (g) below, but Tenant shall not be required to pay any of the review, processing or attorney's fees set forth below. The foregoing notwithstanding, Landlord shall have no right of consent or approval, of any kind, in connection with the issuance, sale, transfer, assignment, or hypothecation of securities and/or assets by Tenant for which filings are required to be made with federal or state agencies, including by way of illustration, but not limitation, the Securities and Exchange commission or the California Commissioner of Corporations. Subject to the foregoing, Tenant may transfer its interest pursuant to this Lease only upon the following express conditions: (a) That the proposed transferee shall be subject to the prior written consent of Landlord, which consent will not be unreasonably withheld (it being agreed that if Landlord does not respond within ten (10) business days from a written request for sublease or assignment, such refusal to respond shall be deemed an approval by Landlord to such assignment or sublease) but, without limiting the generality of the foregoing, it shall be reasonable for Landlord to deny such consent if: (i) The use to be made of the Premises by the proposed transferee is. (a) not generally consistent with the character and mature of all other tenancies in the Project, or (b) a use which conflicts with any so-called "exclusive" then in favor of, or for any use which is the same as that stated in any percentage Lease to, another tenant of the Project or any of Landlord's then buildings which are in the same complex as the Project, or (c) a use which would be prohibited by any other portion of this Lease (including but not limited to any Rules and Regulations then in effect); or 18

(ii) The financial responsibility of the proposed transferee is not reasonably satisfactory to Landlord or in any event not at least equal to those which were possessed by Tenant as of the date of execution of this Lease; (b) That Tenant shall pay to Landlord Landlord's then standard processing fee, review fee and attorneys' fees up to the sum of One Thousand Dollars ($1,000.00); (c) That the proposed transferee shall execute an agreement pursuant to which it shall agree to perform faithfully and be bound by all of the terms, covenants, conditions, provisions and agreements of this Lease (provided, however, this Subparagraph (c) shall not be deemed to apply to the economic business terms of the transfer between Tenant and such transferee); (d) That an executed duplicate original of said assignment and assumption agreement or other transfer on Landlord's then standard form, shall be delivered to Landlord within five days after the execution thereof, and that such transfer shall not be binding upon Landlord until the delivery thereof to Landlord and the execution and delivery of Landlord's consent thereto. It shall be a condition to Landlord's consent to any subleasing, assignment or other transfer of part or all of Tenant's interest in the Premises (hereinafter referred to as a "Transfer") that (i) upon Landlord's consent to any Transfer, Tenant shall pay and continue to pay one-half (1/2) of any "Transfer Premium" (defined below), received by Tenant from the transferee; provided, however, Tenant shall have the right to sublease up to twenty percent (20%) of the Premises to individual users without sharing of the Transfer Premium; (ii) any Sublessee of part or all of Tenant's interest in the Premises shall agree that in the event Landlord gives such sublessee notice that Tenant is in default under this Lease following the expiration of any grace or cure period, such sublessee shall thereafter make all sublease or other payments directly to Landlord, which will be received by Landlord without any liability whether to honor the sublease or otherwise (except to credit such payments against sums due under this Lease), and any sublessee shall agree to attorn to Landlord or its successors and assigns at their request should this Lease be terminated for any reason, except that in no event shall Landlord or its successors or assigns be obligated to accept such attornment, (iii) any such Transfer and consent shall be effected on reasonable forms, supplied or approved by Landlord and/or its legal counsel; and (iv) Landlord may require that Tenant not then be in default following the expiration of any grace or cure period hereunder in any respect. "Transfer Premium" shall mean all rent, additional rent or other consideration payable by a transferee in connection with a Transfer in excess of the rent and Additional Rent payable by Tenant under this Lease during the term of the Transfer and if such Transfer is less than all of the Premises, the Transfer Premium shall be calculated on a rentable square foot basis. The Transfer Premium shall be calculated after deducting the reasonable expenses incurred by Tenant for any reasonable Tenant improvements (reasonably approved by Landlord), legal fees, rent concessions and brokerage commissions in connection with the Transfer. "Transfer Premium" shall also include, but not be limited to, key money, bonus money or other cash consideration paid by a transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for services rendered by Tenant to transferee or for assets, fixtures, inventory, equipment, or furniture transferred by Tenant to transferee in connection with such Transfer. If Landlord consents to a requested assignment or sublease, Tenant hereby agrees that (i) it shall thereupon be deemed, automatically and irrevocably to have assigned to Landlord as additional security for the performance and observance of Tenant's obligations and covenants under this Lease, all rent or other sums received or to be received by 19

Tenant in connection therewith and (ii) Landlord as assignee and as attorney-in- fact of Tenant, or a receiver for Tenant whether or not appointed on Landlord's application may collect such rent or other sums and apply the same toward Tenant's obligations under this Lease. Notwithstanding the foregoing, Tenant shall have the right to collect such rent and other sums unless and until Tenant commits any act of default hereunder following the expiration of any grace or cure period. Tenant hereby agrees and acknowledges that the above conditions imposed upon the granting of Landlord's consent to any proposed Transfer by Tenant are reasonable. Any sale assignment, hypothecation, transfer or subletting of this Lease which is not in compliance with the provisions of this Article 15 shall be void. In no event shall the consent by Landlord to an assignment or subletting be construed as relieving Tenant, any assignee, or sublessee from obtaining the express written consent of Landlord to any further assignment or subletting, or as releasing Tenant from any liability or obligation hereunder whether or not then accrued and Tenant shall continue to be fully liable therefor. No collection or acceptance of rent by Landlord from any person other than Tenant shall be deemed a waiver of any provision of this Article 15 on the acceptance of any assignee or subtenant hereunder, or a release of Tenant (or of any successor of Tenant or any subtenant holding theretofore or thereafter accruing). Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed transferee claims that Landlord his unreasonably withheld or delayed its consent under this Article 15 or otherwise has breached or acted unreasonably under this Article 15, their sole remedies shall be a declaratory judgment and an injunction for the relief sought without any monetary damages, and Tenant hereby waives all other remedies, including, without limitation, any right at law or equity to terminate this Lease, on its own behalf and, to the extent permitted under all applicable laws, on behalf of the proposed transferee; (e) Tenant shall not enter into any sublease or assignment in which any of the following is applicable: (i) The determination of the amount of rent is expressed in whole or in part as a percentage of the income or profits derived by the tenant or subtenant or assignee from the space Leased (other than an amount based on a fixed percentage or percentages of gross receipts or gross sales); (f) In any sublease or assignment in which the amount of rent is determined in whole or in part by reference to the gross sales or receipts of the subtenant or assignee such sublease or assignment shall contain a provision which prohibits subleasing or assigning or if subleasing or assigning is permitted it shall prohibit the tenant or any successor in interest from subleasing all or any portion of its Leasehold interest for an amount of rent determined in whole or in part from the income or profits derived by any person from such interest (other than an amount based in a fixed percentage or percentages of receipts or sales); provided, however, Tenant shall have the right to sublease up to twenty percent (20%) of the Premises to individual users without sharing of the Transfer Premium. (g) Notwithstanding anything to the contrary contained in this Article 15, (i) an internal Transfer, (it) an assignment or subletting of all or a portion of the Premises to an affiliate of Tenant (an entity which is controlled by, controls, or is under common control with, Tenant) ("Permitted Transferees"), or a subletting or assignment of all of the premises to a purchaser of all or substantially all of the assets of Tenant or a Permitted Transferee, or (iii) a transfer, by law 20

or otherwise, in connection with the merger, consolidation or other corporate reorganization of Tenant or a Permitted Transferee, shall not be deemed a Transfer requiring payment of a Transfer Premium under this Article 15, but Tenant shall still be required to obtain Landlord's written consent and approval of such transfer; provided, however, Landlord shall only be able to disapprove of such transfer under 15(a)(i) above, or if the transfer would result in either Tenant or the Permitted Transferee having a net worth less than that of Tenant on the date this Lease is executed (or in Landlord's reasonable business discretion the Permitted Transferee does not have the financial ability to meet the economic terms and conditions of the Lease); and further provided that such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease. "Control" as used in this Section 15(g) shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person or entity, or ownership of any sort, whether through the ownership of voting securities, by contract or otherwise. ARTICLE 16 - Damage Or Destruction ---------------------------------- If the Project is damaged by fire or other insured casualty and the insurance proceeds have been made available therefor by the holder or holders of any mortgages or deeds of trust covering the Premises or the Project, the damage shall be repaired by and at the expense of the Landlord to the extent such insurance proceeds are available therefor and provided such repairs can, in Landlord's sole opinion, be completed within one hundred eighty (180) days after the occurrence of such damage becomes known to Landlord without the payment of overtime or other premiums, and until such repairs are completed rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of its business, provided that if the damaged portion renders the entire Premises unusable by Tenant, then rent shall be abated for the entire Premises (but there shall e no abatement of rent by reason of any portion of the Premises being unusable for a period equal to one (1) day or less). If the damage is due to the fault or neglect of Tenant, its employees, guests, invitees and the like, there shall be no abatement of rent, and Tenant agrees to make a claim, in an expeditious manner, under its insurance policies for the cost of such damage or destruction, and to assign any such insurance proceeds from its insurance policies to Landlord. If pairs cannot, in Landlord's opinion, be completed within one hundred eighty (180) days, Landlord may, at its option, make them in a reasonable time and in such event this Lease shall continue in effect and the rent shall be abated, if at all, in the manner provided in this Article 16; provided, however, that if repairs cannot be completed within one hundred eighty (180) days from commencement of construction, Tenant shall have the right after the expiration of such one hundred eighty (180) days to terminate this Lease upon thirty (30) days' written notice to Landlord. Tenant's failure to so notify Landlord within such thirty (30) day period shall be deemed to constitute Tenant's waiver of its right to terminate this Lease. In addition, Landlord may elect not to rebuild and/or restore the Project, and instead terminate this Lease, by notifying Tenant in writing of such termination within thirty (30) days after Landlord receives notice of the date of damage, such notice to include a termination date giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect only if the Project shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and the damage is not fully covered, except for deductible amounts, by Landlord's insurance policies. A total destruction of the Project shall automatically terminate this Lease. Except as provided in this Article, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant's business or property arising 21

from such damage or destruction or the making of any repairs, alterations or improvements in or to any portion of the Project or the Premises or in or to fixtures, appurtenances and equipment therein. Tenant understands that Landlord will not carry insurance of any kind to Tenant's furniture, furnishings, fixtures or equipment, and that Landlord shall not be obligated to repair any damage thereto or replace the same. with respect to any damage which Landlord is obligated to repair or elects to repair, Tenant, as a material inducement to Landlord entering into this Lease, irrevocably waives and releases its rights under the provisions of Sections 1932 and 1933 of the California Civil Code. ARTICLE 17 - Subordination -------------------------- This Lease is subject and subordinate to all ground or underlying Leases, mortgages and deeds of trust which affect the property or the Project, including all renewals, modifications, consolidations, replacements and extensions thereof; provided, however, if the lessor under any such lease or the holder or holders of any such mortgage or deed of trust shall advise Landlord that they desire or require this Lease to be prior and superior thereto , upon written request of Landlord to Tenant, Tenant agrees to promptly execute, acknowledge and deliver any and all documents or instruments which Landlord or such lessor, holder or holders deem necessary or desirable for purposes thereof. Landlord shall have the right to cause this Lease to be and become and remain subject and subordinate to any and all ground or underlying leases, mortgages or deeds of trust which may hereafter be executed covering the Premises, the Project or the property or any renewals, modifications, consolidations, replacements or extensions thereof, for the full amount of all advances made or to be made thereunder and without regard to the time or character of such advances, together with interest thereon and subject to all the terms and provisions thereof, provided, however, that Landlord obtains from the lender or other party in question a written undertaking in favor of Tenant to the affect that such lender or other party will not disturb Tenant's right of possession under this Lease if Tenant is not then or thereafter in breach following the expiration of any grace or cure period of any covenant or provision of this Lease; and Tenant agrees, within fifteen (15) days after Landlord's written request therefor, to execute, acknowledge and deliver upon request any and all documents or instruments requested by Landlord or necessary or proper to assure the subordination of this Lease to any such mortgages, deed of trust, or leasehold estates. Tenant agrees not to assert against Landlord and hereby expressly waives any claims for interference with, or disturbance of Tenant's right of possession and/or breach of the covenant quiet enjoyment by reason of the enforcement of any and all ground or underlying leases, mortgages and deeds of trust affecting the Project or the Premises and all renewals, modifications, consolidations, replacements and extensions thereof, whether or not the Lease is subordinate thereto. The foregoing notwithstanding, Landlord shall use its best efforts to obtain a Non-Disturbance and Attornment Agreement from any lienholders or mortgagees of the Project, whether currently existing or in the future. The Non-Disturbance and Attornment Agreement shall be in a form reasonably acceptable to Tenant and any lienholders or mortgagees. ARTICLE 18 - Eminent Domain --------------------------- If the whole of the Premises or the Project or so much thereof as to render the balance unusable by Tenant shall be taken under power of eminent domain, or is sold, transferred or conveyed in lieu thereof, this Lease shall automatically terminate as of the date of such 22

condemnation, or as of the date possession is taken by the condemning authority at Landlord's option. No award for any partial or entire taking shall be apportioned, and Tenant hereby assigns to Landlord any award which may be made in such taking or condemnation, together with any and all rights of Tenant now or hereafter arising in or to the same or any part thereof; provided, however, that nothing contained herein shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord any award made to Tenant for the taking of personal property and fixtures and one-half (1/2) of any leasehold bonus as it relates to the Premises belonging to Tenant and removable by Tenant at the expiration of the term hereof as provided hereunder or for the interruption of, or damage to, Tenant's business. In the event of a partial taking described in this Article 18, or a sale, transfer or conveyance in lieu thereof, which does not result in a termination of this Lease, the rent shall be apportioned according to the ratio that the part of the Premises remaining useable by Tenant bears to the total area of the Premises. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure. ARTICLE 19 - Default -------------------- Each of the following acts or omissions of Tenant or of any guarantor of Tenant's performance hereunder, or occurrences, shall constitute an "Event of Default": (a) Failure or refusal to pay Monthly Basic Rental, Additional Rent or any other amount to be paid by Tenant to Landlord hereunder within five (5) calendar days after notice that the same was not paid when due or payable hereunder; said five (5) day period shall be in lieu of, and not in addition to, the notice requirements pertaining to the unlawful detainer statutes; (b) Except as set forth in item (g) below, failure to perform or observe other covenant or condition of this Lease to be performed or observed within thirty (30) days following written notice to Tenant of such failure; provided that if the nature of such default cannot reasonably be cured within thirty (30) days, Tenant shall not be in default if it commences such cure within such period and diligently proceeds with such cure and does cure within ninety (90) days. Such thirty (30) day notice shall also constitute any notice required under Section 1161 of the California Code of Civil Procedure; (c) Abandonment or vacationing or failure to accept tender of possession of the Premises or any significant portion thereof, unless Tenant continues to pay Monthly Basic Rental and all other sums due hereunder; (d) The taking in execution or by similar process or law (other than by eminent. domain) of the estate hereby created; (e) The filing by Tenant or any guarantor hereunder in any court pursuant to any statute of a petition in bankruptcy or insolvency or for reorganization or arrangement for the appointment of a receiver of all or a portion of Tenant's property; the filing against Tenant or any guarantor hereunder of any such petition, or the commencement of a proceeding for the appointment of a trustee, receiver or liquidator for Tenant, or for any guarantor hereunder, or of any of the property of either, or a proceeding by any governmental authority for the dissolution or liquidation of Tenant or any guarantor hereunder, if such proceeding shall not be dismissed or 23

trusteeship discontinued within thirty (30) days after commencement of such proceeding or the appointment of such trustee or receiver; or the making by Tenant or any guarantor hereunder of an assignment for the benefit of creditors. Tenant hereby stipulates to the lifting of the automatic stay in effect and relief from such stay for Landlord in the event Tenant files a petition under the United States Bankruptcy laws, for the purpose of Landlord pursuing its rights and remedies against Tenant and/or a guarantor of this Lease; (f) Tenant's failure to cause to be released any mechanics liens filed against the Premises or the Project within twenty (20) days after the date the same shall have been filed or recorded; or (g) Tenant's failure to observe or perform according to the provisions of Articles 17 or 25 within fifteen (15) business days after notice from Landlord. All defaults following the expiration of any applicable notice or grace period by Tenant of any covenant or condition of this Lease shall be deemed by the parties hereto to be material. ARTICLE 20 - Remedies --------------------- (a) In the event of a breach of or default under this Lease as provided in Article 19 hereof, Landlord may exercise all of its remedies as may be permitted by law, including but not limited to the remedy provided by Section 1951.4 of the California Civil Code, and including without limitation, terminating this Lease, reentering the Premises and removing all persons and property therefrom, which property may be stored by Landlord at a warehouse or elsewhere at the risk, expense and for the account of Tenant. If Landlord elects to terminate this Lease, Landlord shall be entitled to recover from Tenant the aggregate of all amounts permitted by law, including but not limited to (i) the worth at the time of any unpaid rent which has been earned at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonable avoided; plus (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant; and (v) at Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The term "rent" as used in this Article 20(a) shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in items (i) and (ii), above, the "worth at the time of award" shall be computed by allowing interest at the rate set forth in item (e), below, but in no case greater than the maximum amount of such interest permitted by law. As used in item (iii), above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). If Landlord terminates this Lease or Tenant's right to possession, Landlord shall 24

use reasonable efforts to mitigate Landlord's damages, and Tenant shall be entitled to submit roof of such failure to mitigate as a defense to Landlord's claims hereunder, if mitigation of damages by Landlord is required by applicable law. Further, Tenant shall be liable for all unamortized leasing commissions paid by or owing by Landlord arising from this Lease and extensions thereof. (b) Nothing in this Article 20 shall be deemed to affect Landlord's right to indemnification for liability or liabilities arising prior to the termination of this Lease for personal injuries or property damage under the indemnification clause or clauses contained in this Lease. (c) Notwithstanding anything to the contrary set forth herein, Landlord's re-entry to perform acts of maintenance or preservation of or in connection with efforts to relet the Premises or any portion thereof, or the appointment of a receiver upon Landlord's initiative to protect Landlord's interest under this Lease shall not terminate Tenant's right to possession of the Premises or any portion thereof and, until Landlord does elect to terminate this Lease, this Lease shall continue in full force and effect and Landlord shall enforce all of Landlord's rights and remedies hereunder including, without limitation, the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if Lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due. (d) All rights, powers and remedies of Landlord hereunder and under an other agreement now or hereafter in force between Landlord and Tenant shall cumulative and not alternative and shall be in addition to all rights, powers and remedies given to Landlord by law, and the exercise of one or more rights or remedies shall not impair Landlord's right to exercise any other right or remedy. (e) Any amount due from Tenant to Landlord hereunder which is not paid within five (5) days after Tenant's receipt of written notice that the same is due shall bear interest at the lower of 16% per annum or the maximum lawful rate of interest from the due date until paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease. In addition to such interest: (a) if Basic Rental is not paid within ten (10) days after the same is due, a late charge equal to ten percent (10%) of the amount overdue or $100, whichever is greater, shall be assessed and shall accrue for each calendar month or part thereof until such rental, including the late charge, is paid in full, which late charge Tenant hereby agrees is a reasonable estimate of the damages Landlord shall Buffer as a result of Tenant's late payment and (b) an additional charge of $25 shall be assessed for any check (liven to Landlord by or on behalf of Tenant which is not honored by the drawee thereof; which damages include Landlord's additional administrative and other costs associated with such late payment and unsatisfied checks and the parties agree that it would be impracticable or extremely difficult to fix Landlord's actual damage in such event. Such charges for interest and late payments and unsatisfied checks are separate and cumulative and are in addition to and shall 25

not diminish or represent a substitute for any or all of Landlord's rights or remedies under any other provision of this Lease. (f) Tenant shall be liable for any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's default following the expiration of any applicable cure or notice period under this Lease, or which in the ordinary cause of things would be likely to result therefrom. ARTICLE 21 - Transfer of Landlord's Interest -------------------------------------------- In the event of any transfer or termination of Landlord's interest in the Premises or the Project by sell, assignments, transfer, foreclosure, deed-in- lieu of foreclosure or otherwise whether voluntary or involuntary, Landlord shall be automatically relieved of any and all obligations and liabilities on the part of Landlord which accrue from and after the date of such transfer or termination, including furthermore without limitation the obligation of Landlord under Article 4 and California Civil Code 1950.7 above to return the security deposit, provided said security deposit is transferred to said assignee. Tenant expressly waives and releases its rights with regard to its security deposit pursuant to the provision of California Civil Code 1950.7 or any substitute or successor statute to the extent the same could be asserted by Tenant against Landlord. ARTICLE 22 - Broker ------------------- In connection with this Lease, Landlord and Tenant each warrant and represent that it has had dealings only with firm(s) set forth in Article 1.H. of the Basic Lease Provisions and that it knows of no other person or entity who is or might be entitled to a commission, finder's fee or other like payment in connection herewith and each does hereby indemnify and agree to hold the other, its agents, partners, representatives, officers, affiliates, shareholders, employees, successors and assigns harmless from and against any and all loss, liability and expenses that such party may incur should such warranty and representation prove incorrect, inaccurate or false. ARTICLE 23 - Parking -------------------- Tenant shall have the right but not the obligation to rent up to the number of parking passes set forth in Article 1.1. of Basic Lease Provisions. The initial parking rates are set forth in Article 1.J. of the Basic Lease Provisions. Such parking shall be available upon terms and conditions to be established from time to time by Landlord or Landlord's operator of such parking facilities, but Landlord does not warrant or represent that the parking will continue to be available if Tenant does not rent the same continuously from the commencement of the term of this Lease. Tenant agrees that it shall be liable for and pay for any and all parking taxes imposed in connection with such parking. ARTICLE 24 - Waiver ------------------- No waiver by Landlord of any provision of this Lease shall be deemed to be a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. No provision of this Lease may be waived by Landlord, except by an instrument in 26

writing executed by Landlord. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act of Tenant, whether or not similar to the act so consented to or approved. No act or thing done by Landlord or Landlord's agents during the term of this Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept such surrender shall be valid unless in writing and signed by Landlord. Any payment by Tenant or receipt by Landlord of an amount less than the total amount then due hereunder shall be deemed to be in partial payment only thereof and not a waiver of the balance due or an accord and satisfaction, notwithstanding any statement or endorsement to the contrary on any check or any other instrument delivered concurrently therewith or in reference thereto. Accordingly, Landlord may accept any such amount and negotiate any such check without prejudice to Landlord's right to recover all balances due and owing and to pursue its other rights against Tenant under this Lease, regardless of whether Landlord makes any notation on such instrument of payment or otherwise notifies Tenant that such acceptance or negotiation is without prejudice to Landlord's rights. ARTICLE 25 - Estoppel Certificate --------------------------------- Tenant shall, at any time and from time to time, upon not less than fifteen (15) days' prior written notice from Landlord, execute, acknowledge and deliver to Landlord a statement in writing certifying the following information, (but not limited to the following information in the event further information is requested by Landlord): (i) that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as modified, is in full force and effect); (ii) the dates to which the rental and other charges are paid in advance, if any; (iii) the amount of Tenant's security deposit, if any; and (iv) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, and no events or conditions then in existence which, with the passage of time or notice or both, would constitute a default on the part of Landlord hereunder, or specifying such defaults, events or conditions, if any are claimed. It is expressly understood and agreed that any such statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of the Real Property. Tenant's failure upon Landlord's reasonable request to deliver such statement within such time shall, at the option of Landlord, constitute a default under this Lease. Furthermore, Tenant's failure to deliver such statement within such time shall constitute an admission by Tenant that all statements contained therein are true and correct. Tenant agrees to execute all documents required in accordance with this Article 25 within fifteen (15) days after delivery of said documents. ARTICLE 26 - Liability Of Landlord ---------------------------------- Tenant agrees to look solely to Landlord's interest in the Project and the Premises if any for the satisfaction of any remedy of Tenant for the collection of a judgment (or other judicial process) requiring the payment of money by Landlord in the event of any default by Landlord hereunder or any claim cause of action, obligation, contractual statutory or otherwise by Tenant against Landlord concerning, arising out of or relating to any matter relating to this Lease and all of the covenants and condition or any obligations, contractual, statutory, or otherwise set forth herein, and no other property or assets of Landlord, or any officer, director, shareholder, partner, trustee, agent, servant or employee of Landlord (the "Representative") shall be subject to levy, 27

execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this Lease, Landlord's obligations to Tenant, whether contractual, statutory or otherwise, the relationship of Landlord and Tenant hereunder, or Tenant's use or occupancy of the Premises. Tenant further understands that any liability, duty or obligation of Landlord to Tenant, shall no longer accrue as of the date that Landlord or any of the Representatives no longer have any right, title or interest in or to the Project, and shall automatically cease if another entity has agreed to assume such liabilities through a written assignment and assumption agreement. ARTICLE 27 - Inability To Perform --------------------------------- This Lease and the obligations of Tenant hereunder shall not be affected or impaired because Landlord is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of any stoppage due to strikes, lockouts, acts of God, or any other cause previously, or at such time, beyond the reasonable control or anticipation of Landlord (collectively, a "Force Majeure") and Landlord's obligations under this Lease shall be forgiven and suspended by any such Force Majeure, excepting, however, Landlord's obligations under the last sentence of Article 2 and Article 11(g). ARTICLE 28 - Hazardous Waste ---------------------------- (a) Tenant shall not cause or permit any Hazardous Material (as defined in Article 28(d) below) to be brought, kept or used in or about the Project by Tenant, its agents, employees, contractors, or invitees, excluding, however, customary office supplies, and equipment. Tenant indemnitees Landlord from and against any breach by Tenant of the obligations stated in the preceding sentence and agrees to defend and hold Landlord harmless from and against any and all claims, judgments, damages, penalties, fines, costs, liabilities, or losses (including, without limitation, diminution in value of the Project, damages; for the loss or restriction or use of rentable or useable space or of any amenity of the Project, damages arising from any adverse impact or marketing of space in the Project, and sum paid in settlement of claims, attorneys' fees, consultant fees, and expert fees) which arise during or after the term of this Lease as a result of such breach. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal, or restoration work required by an federal, state, or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Project. Without limiting the foregoing, if the presence of any Hazardous Material on the Project caused or permitted by Tenant results in any contamination of the Project and subject to the provisions of Articles 9, 10 and 11, hereof, Tenant shall promptly take all actions at its sole expense as are necessary to return the Project to the condition existing prior to the introduction of any such Hazardous Material and the contractors to be used by Tenant must be approved by the Landlord, which approval shall not be unreasonably withheld so long as such actions would not potentially have any material adverse long-term or short-term effect on the Project and so long as such actions do not materially interfere with the use and enjoyment of the Project by the other tenants thereof. (b) Landlord and Tenant acknowledge that Landlord may become legally liable for the costs of complying with Laws (as defined in Article 29(e) below) relating to Hazardous 28

material which are not the responsibility of Landlord or the responsibility of Tenant, including the following: (i) Hazardous Material present in the soil or ground water on the project of which Landlord has no knowledge as of the effective date of this Leases (ii) a change in Laws which relate to Hazardous material which make that Hazardous Material which is present on the Property as of the effective date of his Lease, whether known or unknown to Landlord, a violation of such new Laws: (iii) Hazardous Material that migrates, flows, percolates, diffuses, or in any way moves on to, or under the Project after the effective date of this Lease; or Hazardous material present on or under the Project as a result of any discharge, dumping or spilling (whether accidental or otherwise) on the Product by other lessees of the Project or their agents, employees, contractors, or invitees, or by others. Accordingly, Landlord and Tenant agree that the cost of complying with Laws relating to Hazardous Material on the Project for which Landlord is legally liable and which are paid or incurred by Landlord shall not be an Operating Cost. (c) it shall not be unreasonable for Landlord to withhold its consent to any proposed Transfer if (i) the proposed transferee's anticipated use of the Premises involves the generation, storage, use, treatment, or disposal of Hazardous Material; ( ) the proposed Transferee has been required by any prior landlord, lender, or governmental authority to take remedial action in connection with Hazardous material contaminating a property if the contamination resulted from such Transferee's actions or use of the property in question; or (iii) the proposed Transferee is subject to an enforcement order issued by any governmental authority in connection with the use, disposal, or storage of a Hazardous Material. (d) As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material, or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term Hazardous material" includes, without limitation, any material or substance which is (i) defined as "Hazardous Waste," "Extremely Hazardous Waste," or "Restricted Hazardous Waste" under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a "Hazardous Substance" under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a "Hazardous Material," "Hazardous Substance," or "Hazardous Waste" under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a "Hazardous Substance" under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as Hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (viii) designated as a Hazardous Substance, pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. (S) 1317), (ix) defined as a "Hazardous Waste" pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq. (42 U.S.C. (S) 6903), or (x) defined as a "Hazardous Substance" pursuant to section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. & 9601 et seq. (42 U.S.C. & 9601). 29

(e) As used herein, the term "Laws" mean any applicable federal, state or local laws, ordinances, or regulations relating to any Hazardous material affecting the Project, including, without limitation, the laws, ordinances, and regulations referred to in Article 28 (d) above. ARTICLE 29 - Surrender of Premises; Removal of Property ------------------------------------------------------- (a) The voluntary or other surrender of this Lease by Tenant to Landlord, or a mutual termination hereof, shall not work a merger, and shall at the option of Landlord, operate as an assignment to it of any or all subleases or subtenancies affecting the Premises. (b) Upon the expiration of the term of this Lease, or upon any earlier termination of this Lease, Tenant shall quit and surrender possession of the Premises to Landlord in as good order and condition as the same are now and hereafter may be improved by Landlord or Tenant, reasonable wear and tear and repairs which are Landlord's obligation excepted, and shall, without expense to Landlord, remove or cause to be removed from the Premises all debris and rubbish, all furniture, equipment, business and trade fixtures, free-standing cabinet work, moveable partitioning and other articles of personal property owned by Tenant or installed or placed by Tenant at its own expense in the Premises, and all similar articles of any other persons claiming under Tenant unless Landlord exercises its option to have any subleases or subtenancies assigned to it, and Tenant shall repair all damage to the Premises resulting from the installation and removal of such items to be removed. (c) Whenever Landlord shall reenter the Premises as provided in Article 20 hereof, or as otherwise provided in this Lease, any property of Tenant not removed by Tenant upon the expiration of the term of this Lease (or within forty-eight (48) hours after a termination by reason of Tenant's default), as provided in this Lease, shall be considered abandoned and Landlord may remove any or all of such items and dispose of the same in any manner or store the same in a public warehouse or elsewhere for the account and at the expense and risk of Tenant, and if Tenant shall fail to pay the cost of storing any such property after it has been stored for a period of ninety (90) days or more, Landlord may sell any or all of such property at public or private sale, in such manner and at such times and places as Landlord, in its sole discretion, may deem proper, without notice or to demand upon Tenant, for the payment of all or any part of such charges or the removal of any such property, and shall apply the proceeds of such sale: first, to the cost and expense of such sale, including reasonable attorneys' fees for services rendered; second, to the payment of the cost of or charges for storing any such property; third, to the payment of any other sums of money which may then or thereafter be due to Landlord from Tenant under any of the terms hereof; and fourth, the balance, if any, to Tenant. (d) All fixtures, equipment, alterations, additions, improvements and/or appurtenances attached to or built into the Premises prior to or during the Term, whether by Landlord or Tenant and whether at the expense of Landlord or Tenant, or of both, shall be and remain part of the Premises and shall not be removed by Tenant at the end of the term unless otherwise expressly provided for in this Lease or unless such removal is required by Landlord pursuant to the provisions of Article 9, above. Such fixtures, equipment, Tenant Improvements, alterations, additions, improvements and/or appurtenances shall include but not be limited to: all floor coverings, drapes, paneling, built-in cabinetry, molding, doors, vaults (including vault doors), plumbing systems, electrical systems, lighting systems, silencing equipment, 30

communication systems, all fixtures and outlets for the systems mentioned above and for all telephone, radio, telegraph and television purposes, and any special flooring or ceiling installations. Notwithstanding the foregoing, Tenant shall have the right to remove any nonpermanently affixed alterations or free-standing improvements mad and paid by Tenant, so long as Tenant repairs any damage to the Premises caused by such removal. ARTICLE 30 - Miscellaneous -------------------------- (a) SEVERABILITY; ENTIRE AGREEMENT. Any provision of this Lease which shall prove to be invalid, void, or illegal shall in no way affect, impair or invalidate any other provision hereof any such other provisions shall remain in full force and effect. This Lease and the Exhibits and any Addendum attached hereto constitute the entire agreement between the parties hereto with respect to the subject matter hereof, and no prior agreement or understanding pertaining to any such matter shall be effective for any purpose. No provision of this Lease may be amended or supplemented except by an agreement in writing signed by the parties hereto or their successor in interest. This Lease shall be governed by and construed in accordance with the laws of the State of California. (b) ATTORNEYS, FEES. (i) In any action to enforce the terms of this Lease, including any suit by Landlord for the recovery of rent or possession of the Premises, the losing party shall pay the successful party a reasonable sum for attorneys' fees in such suit and such attorneys' fees shall be deemed to have accrued prior to the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. (ii) Should Landlord, without fault on Landlord's part, be made a party to any litigation instituted by Tenant or by any third party against Tenant, or by or against any person holding under or using the Premises by license of Tenant, or for the foreclosure of any lien for labor or material furnished to or for Tenant or any such other person or otherwise arising out of or resulting from any act or transaction of Tenant or of any such other person, Tenant covenants to save and hold Landlord harmless from any judgment rendered against Landlord or the Premises or any part thereof and from all costs and expenses, including reasonable attorneys' fees incurred by Landlord in collection with such litigation. (iii) When legal services are rendered by an attorney at law who is an employee of a party, shall be determined as to amount, including overhead, by consideration of the same factors, including but not limited by, the importance of the matter, time applied, difficulty and results, as are considered when an attorney not in the employ of a party is engaged to render such service. (c) TIME OF ESSENCE. Each of Tenant's covenants herein is a condition and time is of the essence with respect to the performance of every provision of this Lease. (d) HEADINGS. The article headings contained in this Lease are for convenience only and do not in any way limit or amplify any term or provision hereof. The terms "Landlord" and "Tenant" as used herein shall include the plural as well as the singular, the neuter shall include the masculine and feminine genders and the obligations herein imposed upon Tenant 31

shall be joint and several as to each of the persons, firms or corporations of which Tenant may be composed. (e) RESERVED AREA. Tenant hereby acknowledges and agrees that the, exterior walls of the Premises and the area between the finished ceiling of the Premises and the slab of the floor of the project thereabove have not been demised hereby and the use thereof together with the right to install, maintain, use, repair and replace pipes, ducts, conduits and wires leading through, under or above the Premises in locations which will not materially interfere with Tenant's use of the Premises and serving other parts of the Project are hereby excepted and reserved unto Landlord. (f) NO OPTION. The submission of this Lease by Landlord, its agent or representative for examination or execution by Tenant does not constitute an option or offer to Lease the Premises upon the terms and conditions contained herein or a reservation of the Premises in favor of Tenant, it being intended hereby that this Lease shall only become effective upon the execution hereof by Landlord and delivery of a fully executed counterpart hereof to Tenant. (g) USE OF PROJECT NAME; IMPROVEMENTS. Tenant shall not be allowed to use the name, picture or representation of the Project, or words to that effect, in connection with any business carried on in the Premises or otherwise (except as Tenant's address) without the prior written consent of Landlord. In the event that Landlord undertakes any additional improvements on the real property including but not limited to new construction or renovation or additions to the existing improvements, Landlord shall not be liable to Tenant for any noise, dust, vibration or interference with access to the Premises or disruption in Tenant's business caused thereby and rental hereunder shall only be abated to the extent that such interference materially interferes with Tenant's business. (h) RULES AND REGULATIONS. Tenant shall observe faithfully and comply strictly with the Rules and Regulations attached to this Lease and made a part hereof, and such other Rules and Regulations as Landlord may from time to time reasonably adopt for the safety, care and cleanliness of the Project, the facilities thereof, or the preservation of good order therein. Landlord shall not be liable to Tenant for violation of any such Rules and Regulations, or for the breach of any covenant or condition in any Lease by any other tenant in the Project. A waiver by Landlord of any Rule or Regulation for any other tenant shall not constitute nor be deemed a waiver of the Rule or Regulation for this Tenant. (i) QUIET POSSESSION. Upon Tenant's paying the Basic Rent, Additional Rent and other sums provided hereunder and observing and performing all of the covenants, conditions and provisions on Tenant's part to be observed and perforated hereunder, Tenant shall have quiet possession of the Premises for the entire term hereof, subject to all of the provisions of this Lease. (j) RENT. All payments required to be made hereunder shall be deemed to be rent, whether or not described as such. 32

(k) SUCCESSORS AND ASSIGNS. Subject to the provisions of Article 15 hereof, all of the covenants, conditions and provisions of this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and assigns. (l) NOTICES. Any notice required or permitted to be given hereunder shall be in writing and may be given by facsimile, personal service, first-class mail, or registered or certified mail, return receipt requested, addressed to Tenant at the Premises with a copy via U.S. Mail, to Robert Thau, Esq., Rosenfeld, Meyer & Susman at 9601 Wilshire Boulevard, 5th Floor, Beverly Hills, California 90210 (provided, however, a notice shall not be ineffective because a copy was not sent to Robert Thau, Esq., or any other designated copy recipient), or to Landlord at the address of the place from time to time established for the payment of rent and which shall be effective upon proof of delivery. Either party may by notice to the other specify a different address for notice purposes except that, upon Tenant's taking possession of the Premises, the Premises shall constitute Tenant's address for notice purposes. A copy of all notices to be given to Landlord hereunder shall be concurrently transmitted by Tenant to such party hereafter designated by notice from Landlord to Tenant. Any notices sent by Landlord regarding or relating to eviction procedures, including without limitation Three Day Notices, may be sent by regular mail. (m) PERSISTENT DELINQUENCIES. In the event that Tenant shall be delinquent by more than fifteen (15) days in the payment of rent on three (3) separate occasions in any twelve (12) month period, Landlord shall have the right to require Tenant to deposit (and maintain) three (3) months' rent in advance to be used as security for future rental payments due hereunder and may be applied by Landlord for the payment of Monthly Basic Rental and other sums as the same become due hereunder. (n) RIGHT OF LANDLORD TO PERFORM. All covenants and agreements to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any abatement of rent, except as otherwise provided in this Lease. If Tenant shall fail to pay any sum of money, other than rent, required to be paid by it hereunder or shall fail to perform any other act on its part to be performed hereunder, and such failure shall continue beyond any applicable period of notice set forth in this Lease, Landlord may, but shall not e obligated so to do, and without waiving or releasing Tenant from any obligations of Tenant, make any such payment or perform any such other act on Tenant's part to be made or performed as is in this Lease provided. All sums so paid by Landlord and all reasonable incidental costs, together with interest thereon at the rate of ten percent (10%) per annum from the date of such payment by Landlord, shall be payable to Landlord on demand and Tenant covenants to pay any such sums, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of the nonpayment thereof by Tenant as in the case of default by Tenant in the payment of the rent. (o) ACCESS, CHANGES IN PROJECT, FACILITIES, NAME. (i) Every part of the Project except the inside surfaces of all walls, windows and doors bounding the Premises (including exterior building walls, core corridor walls and doors and any core corridor entrance), and any space in or adjacent to the Premises used for 33

shafts, stacks, pipes, conduits, fan rooms, ducts, electric or other utilities, sinks or other building facilities, and the use thereof, as well as access thereto through the Premises for the purposes of operation, maintenance, decoration and repair, are reserved to Landlord. (ii) Tenant shall permit Landlord to install, use and maintain pipes, ducts and conduits within the walls, bearing columns and ceilings of the Premises. (iii) Landlord reserves the right, without incurring any liability to Tenant therefor, to make such reasonable changes in or to the Building and the fixtures and equipment thereof, as well as in or to the street entrances, halls, passages, elevators, stairways and other improvements thereof, as it may deemed necessary or desirable. (iv) Landlord may adopt any name for the Project and Landlord reserves the right to change the name or address of the Building at any time. (p) CORPORATE AUTHORITY. If Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the By-laws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms. If Tenant is a corporation, said corporation and each individual executing this Lease on behalf of said corporation covenants that Tenant shall provide to Landlord a copy of such resolution of the Board of Directors authorizing the execution of this Lease on behalf of such corporation, which copy of resolution shall be duly certified by the secretary or an assistant secretary of the corporation to be a true copy of a resolution duly adopted by the Board of Directors of said corporation. (q) IDENTIFICATION OF TENANT. (a) If more than one person executes this Lease as Tenant, (i) each of them shall be jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions and provisions of this Lease to be kept, observed and performed by Tenant, (ii) the term "Tenant" as used in this Lease shall mean and include each of them jointly and severally, and (iii) the act of or notice from, or notice or refund to, or the signature of, any one or more of them, with respect to the tenancy of this Lease, including, but not limited to, any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the person executing this Lease as Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed. (r) SUBSTITUTE PREMISES. Provided Landlord shall have a full floor tenant for the! fifth (5th) floor of the Project, then Landlord shall have the right at any time during the term hereof, upon giving Tenant not less than one hundred twenty (120) days prior notice, to provide and furnish Tenant with space elsewhere in the Project of the same size or greater and reasonably similar tenant improvements as the Premises, and remove and place Tenant in such space. Landlord shall pay all verified costs and expenses incurred as a result of such removal and relocation of Tenant, including without limitation the cost of replacing Tenant's existing supply of stationary and business cards and relocation of all of Tenant's telephone and communications 34

equipment. Should Tenant refuse to permit Landlord to move Tenant to such new space at the end of said one hundred twenty (120) day period, Landlord or Tenant shall have the right to cancel and terminate this Lease, subject to the cancellation provisions set forth in Article 35, below, and Tenant's prospective obligations hereunder effective ninety (90) days after the date of Landlord's original notification to Tenant of its intent to relocate Tenant. If Landlord moves Tenant to such new space, this Lease and each and all of its terms, covenants and conditions shall remain in full force and effect and shall be deemed applicable to such new space and such new space shall thereafter be deemed to be the "Premises" as though Landlord and Tenant had entered into an express written amendment of this lease with respect thereto. (s) BUILDING CODES. After the Tenant Improvements have been completed, any and all costs attributable to or related to the applicable building codes of the city in which the Project is located (or any other authority having jurisdiction over the Project) arising from Tenants plans, specifications, improvements, alterations or otherwise (other than the Tenant Improvements) shall be paid by Tenant at its sole cost and expense. (t) EXHIBITS AND ADDENDUM. The Exhibits and Addendum, if applicable, attached hereto are incorporated herein by this reference as if fully set forth herein. ARTICLE 31 - Option to Renew ---------------------------- (a) OPTION RIGHT. Landlord hereby grants the Tenant named in this Lease and any Permitted Transferees (the "Original Tenant") one (1) option to extend the Lease term for a period of five, (5) years an ("Option Term"), which option shall, be exercisable only by written notice delivered by Tenant to Landlord set forth below. The rights contained in this Article 31 shall be personal to the original Tenant and may only be exercised by the Original Tenant and any Permitted Transferees (and not any assignee, sublessee or other transferee of the Original Tenant's interest in this Lease, excepting a Permitted Transferee) if the Original Tenant, occupies at least fifty-one percent (51%) of the entire Premises. (b) OPTION RENT. The rent payable by Tenant during the Option Term ("Option Rent") shall be equal to one hundred percent (100%) of the "Market Rent" (defined below). "Market Rent" shall mean the applicable monthly basic rent, including all escalations, direct costs, additional rent and other charges, including rent concessions and tenant improvement allowances at which tenants, as of the commencement of the option term, are leasing non-sublease, nonencumbered, non-equity, space comparable in size, location and quality to the Premises for a term of five (5) years which comparable space is located in office buildings comparable to the Project in the West Los Angeles area of Los Angeles, California. (c) EXERCISE OF OPTIONS. The Option shall be exercised by Tenant only in the following manner (i) Tenant shall not be in default following the expiration of any applicable notice or cure period on the delivery date of the notice to exercise the Option; (ii) Tenant shall deliver written notice to Landlord not more than ten (10) months nor less than nine (9) months prior to the expiration of the Lease term, stating that Tenant is interested in exercising that Option, (iii) within five (5) business days of Landlord's receipt of Tenant's written notice, Landlord shall deliver notice ("Option Rent Notice") to Tenant setting forth the Option Rent; and 35

(iv) if Tenant desires to exercise such Option, Tenant shall provide Landlord written notice within thirty (30) calendar days after receipt of the Option Rent Notice ("Tenant's Acceptance"). (d) DETERMINATION OF MARKET RENT. If Tenant timely and appropriately objects to the Market Rent in Tenant's Acceptance, Landlord and Tenant shall attempt to agree upon the Market Rent using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) calendar days following Tenant's Acceptance ("Outside Agreement Date"), then each party shall make a separate determination of the market Rent which shall be submitted to arbitration in accordance with the following items (i) through (vii): (i) Landlord and Tenant shall each appoint one arbitrator who shall by profession be a current real estate broker or appraiser of commercial high- rise properties in the immediate vicinity of the Project, and who has been active in such field over the last five (5) years. The determination of the arbitrators shall be limited solely to the issue of whether Landlord's or Tenant's submitted Market Rent is the closest to the actual Market Rent as determined by the arbitrators, taking into account the requirements of item (b), above. (ii) The two arbitrators so appointed shall within five (5) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two arbitrators. (iii) The three arbitrators shall within fifteen (15) days of the appointment of the third arbitrator reach a decision as to whether the parties shall Use Landlord's or Tenant's submitted Market Rent, and shall notify Landlord and Tenant thereof. (iv) The decision of the majority of the three arbitrators shall be binding upon Landlord and Tenant. (v) If either Landlord or Tenant fails to appoint an arbitrator within fifteen (15) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant. (vi) If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association, but subject to the instruction set forth in this item (d). (vii) The cost of arbitration shall be paid by Landlord and Tenant equally. ARTICLE 32 - Right of First Offer/Right of First Refusal -------------------------------------------------------- (a) RIGHT OF FIRST OFFER. From and after the sixteenth (16th) month of the Commencement Date, and provided Tenant is not, in default following the expiration of any applicable notice or cure period under this Lease, then Landlord grants to the Original Tenant (and any Permitted Transferees) a right of first offer on any space which becomes available for 36

lease and which is contiguous to the Premises ("First Offer Space"), subject to any rights of renewal or expansion of existing Tenants in the Project executing leases with Landlord prior to the date of this Lease. Tenant's right of first offer shall be on the terms and conditions set forth in this Article. (i) Procedure for Offer. Landlord shall from time to time during the initial Lease term, notify Tenant in writing of the availability to lease space contiguous to the Premises which notice shall set forth the rental rate therefore in accordance with Article 32(a)(iii) below ("First Offer Rent"). Within five (5) business days following such notice, Tenant shall notify Landlord in writing of its desire to lease such available space ("Notice"). (ii) Procedure for Acceptance. In the event Tenant disputes the First Offer Rent applicable to the First Offer Space, Tenant shall concurrently notify Landlord of such dispute, along with the Notice, in which event the First Offer Rent shall be determined in accordance with the terms of Article 31(b) and (d) above, of this Lease. If Tenant does not so notify Landlord within the five (5) business day period, then Landlord shall be free to lease the space to anyone to whom Landlord desires on any terms Landlord desires, provided the amount is not less than five percent (5%) of the First Offer Rent. (iii) First Offer Rent. The rent payable by Tenant for the First Offer Space (the "First Offer Rent") shall be equal to one hundred percent (100%) of the then Market Rent. (iv) Construction in First Offer Space. Landlord and Tenant shall attempt to mutually agree on a tenant improvement allowance for such First Offer Space at the time the First Offer Space becomes available and Tenant receives the Notice in Article 32(a)(i) above. (v) Amendment to Lease. If Tenant timely exercises Tenant's right to lease the First Offer Space as set forth herein, Landlord and Tenant shall within thirty (30) days thereafter execute an amendment to this Lease for the First Offer Space upon the terms and conditions as set forth in the First Offer Notice and this Article 32. Tenant shall commence payment of rent for the First Offer Space and the term of the First Offer S ace shall commence upon the date mutually agreed to by Landlord and Tenant ("First Offer Commencement Date") and shall terminate on the Expiration Date of this Lease. (vi) Termination of right of First Offer. The rights contained in this Article 32 shall be personal to the Original Tenant or any Permitted Transferee, and may only be exercised by the Original Tenant or any Permitted Transferee (and not any other assignee, sublessee or other transferee of the Original Tenant's interest in this Lease) if the Original Tenant or any Permitted Transferee has not subleased fifty percent (50%) or more of the original Premises. Tenant shall not have the right to lease First Offer Space, as provided in this Article 32, or if, as of the date of the attempted exercise of any right of first offer by Tenant, or as of the scheduled date of delivery of the First Offer Space to Tenant, Tenant is in default following any applicable notice or cure period under this Lease. (b) RIGHT OF FIRST REFUSAL. During the first fifteen (15) months after the Commencement Date, and provided Tenant has not subleased fifty percent (50%) or more of the Premises, Landlord hereby grants to the Original Tenant and any Permitted Transferee a right of 37

first refusal with respect to all the available space on the fifth (5th) floor located in the Project other than the Premises ("First Refusal Space"). Tenant's right of first refusal shall be on the terms and conditions set forth in this Article 32(b). (i) Procedure for Offer. During the first fifteen (15) months after the Commencement Date, Landlord shall notify Tenant in writing, from time to time, of third party interest in available space on the fifth (5th) floor of the Project, along with the third party offer acceptable to Landlord ("First Refusal Notice"). (ii) Procedure for Acceptance. If Tenant desires to exercise Tenant's right of first refusal with respect to all or a portion (but not less than 1,500 rentable square feet) of the space described in the First Refusal Notice, then within five (5) business days of delivery of the First Refusal Notice, Tenant shall deliver notice to Landlord of Tenant's intention to exercise its right of first refusal with respect to any portion of the available First Refusal Space on the same terms and conditions of this Lease (including the effective rental rate of $1.71 a rentable square foot and Subparagraph (iii) immediately below); provided, however, that if Tenant desires to take less than all of the First Refusal Space, the remaining space must be in a "commercially leasable configuration" or Tenant cannot exercise its right of first offer hereunder. Landlord shall have the right in its sole and absolute discretion to determine what constitutes a "commercially leasable configuration". If Tenant does not exercise its right of first refusal within such five (5) business day period, then Landlord may lease the First Refusal Space to such third party upon terms and conditions substantially similar to those set forth in the First Refusal Notice. (iii) Construction in First Refusal Space. Landlord and Tenant shall agree in Tenant's acceptance of the First Refusal Space as to the construction, if any, of the First Refusal Space. The amount of tenant improvements shall be proportionately adjusted based on the term remaining on this Lease in comparison to the original Lease term. (iv) Amendment to Lease. If Tenant timely and in writing exercises Tenant's right to lease the First Refusal Space as set forth herein, Landlord and Tenant shall within thirty (30) days thereafter execute an amendment to this Lease for the First Refusal Space upon the terms and conditions as set forth in the First Refusal Notice. Tenant shall commence payment of rent for the First Refusal. Space, and the term of the First Refusal Space shall commence upon the date of delivery of the First Refusal Space to Tenant, including the substantial completion of tenant improvements and shall terminate on the Expiration Date of this Lease. (v) Termination of Right of First Refusal. The rights contained in this Article 32(b) shall be personal to the original Tenant, and may only be exercised by the Original Tenant and any Permitted Transferee (and not any other assignee, sublessee or other transferee of the original Tenant's interest in this Lease, except an affiliate of Tenant) if the original Tenant and any Permitted Transferee occupies at least fifty percent (50%) of the entire Premises and Tenant may not exercise it, right of first refusal, if, as of the date of the attempted exercise of such right of first refusal or as of the scheduled date of delivery of the First Refusal Space to Tenant, Tenant is in material default following the expiration of any applicable notice or cure period under this Lease. 38

ARTICLE 33 - Storage Space -------------------------- ARTICLE 34 -- Signage/Directory ------------------------------- Provided Tenant is not in default hereunder, Tenant shall have the right to the following signage/directory rights: (a) At Landlord's sole cost and expense, the right to fourteen (14) lines in the Project's lobby directory; and (b) Tenant, at Tenant's sole cost and expense, shall have the right to install custom suite identification (including logo and business name) on all entrances to the Premises, subject to Landlord's reasonable approval, which shall not be unreasonably withheld or delayed. ARTICLE 35 - Option to Cancel ----------------------------- Tenant shall have a one-time right to cancel the Lease effective as of the end of the thirty-sixth (36th) month of the initial Lease term only ("Termination Date"). In order for the termination right set forth herein to be valid and effective, Tenant must give Landlord written notice of its intention to cancel the Lease not later than six (6) months prior to the Termination Date. In the event Tenant timely and in writing exercises its option to cancel, Tenant shall, at the time of providing such written notice, pay to Landlord a cancellation fee equal to the sum of (a) the outstanding balance of the Loan (defined in Article 9), (b) the unamortized portion of (i) Tenant Improvements in the amount of Sixty-Two Thousand Fifty-Five Dollars ($62,055.00), (ii) brokerage commissions in the amount of Forty-Five Thousand Eight Hundred Forty-One Dollars and Seventy-Nine Cents ($45,841.79), and (iii) Sixty-One Thousand One Hundred Fifty-Five Dollars ($61,155.00) in rent concessions paid by and given by Landlord in connection with the Lease, and (c) the sum of Forty-Six Thousand Six Hundred Thirteen Dollars and Seventy Cents ($46,613.70) Which equals four (4) months' Monthly Basic Rental (calculated at the effective rate). ARTICLE 36 - Building Antenna(s) or Satellite Dish(es) ------------------------------------------------------ Subject to all governmental laws, rules and regulations, Tenant and Tenant's contractors (which shall first be reasonably approved by Landlord) shall have the right and access to install, repair replace, remove, operate and maintain one (1) so-called "satellite dish" or other similar 39

device, such as antennae (collectively, "Communication Equipment") no greater than one (1) meter in diameter, together with all cable, writing, conduits and related equipment, for the purpose of receiving and sending radio, television, computer, telephone or other communication signals at a location on the roof of the Project designated by Landlord. Landlord shall have the right to require Tenant to relocate the Communication Equipment (at Landlord's cost) at any time to another location on the roof of the Project reasonably approved by Tenant. Tenant shall retain Landlord's roofing contractor to make any necessary penetrations and associated repairs to the roof in order to preserve Landlord's roof warranty. Tenant's installation and operation of the Communication Equipment shall be governed by the following terms and conditions: (a) Tenant's right to install, replace, repair, remove, operate and maintain the Communication Equipment shall be subject to all governmental laws, rules and regulations, and Landlord makes no representation that such laws, rules and regulations permit such installation and operation. (b) All plans and specifications for the Communication Equipment shall be subject to Landlord's reasonable approval. (c) All costs of installation, operation, maintenance and removal (and restoration of the Project due to such removal) of the Communication Equipment and any necessary related equipment (including, without limitation, costs of obtaining any necessary permits and connections to the Project's electrical system) shall be borne by Tenant. (d) It is expressly understood that Landlord retains the right to use the roof of the Project for any purpose whatsoever provided that Landlord shall not unduly interfere with Tenant's use of the Communication Equipment. (e) Tenant shall use the Communication Equipment so as not to cause any interference to other tenants in the Project or with any other tenant's Communication Equipment (installed prior to Tenant's installation), and not to damage the Project or interfere with the normal operation of the Project. (f) Landlord shall not have any obligations with respect to the Communication Equipment. Landlord makes no representation that the Communication Equipment will be able to receive or transmit communication signals without interference or disturbance (whether or not by reason of the installation or use of similar equipment by others on the roof of the Project) and Tenant agrees that Landlord shall not be liable to Tenant therefor. (g) Tenant shall (i) be solely responsible for any damage caused as a result of the Communication Equipment; (ii) promptly pay any tax, license or permit fees charged pursuant to any laws or regulations in connection with the installation, maintenance or use of the Communication Equipment and comply with all precautions and safeguards recommended by all governmental authorities; and (iii) pay for all necessary repairs, replacements, to or maintenance of the Communication Equipment. (h) The Communication Equipment shall remain the sole property of Tenant. Tenant shall remove the Communication Equipment and related equipment at Tenant's sole cost and expense upon the expiration or sooner termination of this Lease or upon the imposition of any 40

governmental law or regulation which may require removal, and shall repair the Project upon such removal to the extent required by such work of removal. If Tenant fails to remove the Communication Equipment and repair the Project within fifteen (15) days after the expiration or earlier termination of this Lease, Landlord may do so at Tenant's expense. The provisions of this Article 36 shall survive the expiration or earlier termination of this Lease. (i) The communication Equipment shall be deemed to constitute a portion of the Premises for purposes of the Basic Lease Provisions of this Lease (j) Tenant shall be solely responsible for the cost of removal of the Communication Equipment from the Project, and for the cost of repairing and restoring the Project to its condition immediately prior to the communication equipment being installed. ARTICLE 37 - Limited Arbitration/Dispute Resolution Procedure ------------------------------------------------------------- The submittal of all matters to arbitration in accordance with the terms of this Article 37 shall be the sole and exclusive method, means and procedure to resolve any and all claims, disputes or disagreements of Fifty Thousand Dollars ($50,000.00) or less arising under this Lease, except for (a) determination of First Offer Rent and Fair Market Rental Rate, which shall be determined in accordance with the applicable Articles above, (b) all claims by either party which (i) seek anything other than enforcement of rights under this Lease, or (ii) are primarily founded upon matters of fraud, willful misconduct, bad faith or any other allegations of tortious action, and seek the award of punitive or exemplary damages, and (c) claims relating to Landlord's exercise of any unlawful detainer rights pursuant to California law or rights or remedies used by Landlord to gain possession of the Premises or terminate Tenant's right of possession to the Premises. Should there be a dispute under the Lease for amounts less than Fifty Thousand Dollars ($50,000.00), and accepted pursuant to (a), (b) or (c) above, then such procedure shall be that Landlord and Tenant shall select an arbitrator, which arbitrator shall be selected and qualified pursuant to the rules of the Judicial Arbitration and Mediation Service (such arbitrator to be selected by a process by which each party either agrees upon a third party arbitrator or selects an independent third party, each of which independent third party shall meet and agree upon such arbitrator, and, failing to agree within fifteen (15) days after the commencement of such process, such arbitrator shall be selected by the rules of the Judicial Arbitration Mediation Service without regard to input by Landlord and Tenant) and whose costs shall be paid for by the losing party unless it is not clear that there is a "losing" party, in which event the costs of arbitration shall be shared equally. The purpose of the use of an arbitrator to resolve such dispute is to avoid the delays incident to the court calendar system of the jurisdiction within which the Premises are located. Therefore, the parties agree that if the issue in dispute between Landlord and Tenant under this Article may be expected to be resolved under the then current calendar of the court of appropriate jurisdiction within a period not exceeding six (6) months from the date the issue is in dispute arises, then the arbitration process described hereinabove shall not be utilized, an the matter shall proceed through the judicial process in the court of appropriate jurisdiction. 41

IN WITNESS WHEREOF, the parties have executed this Lease, consisting of the foregoing provisions and Articles, including all exhibits and other attachments referenced therein, as of the date first above written. "TENANT" "LANDLORD" SmarTalk Teleservices, Inc., LAOP, IV, LLC, a California corporation a Nevada limited liability company, By: Metropolitan Falls Partners, By: /s/ Robert H. Lorsch a California general partnership ---------------------------- Its: Managing Member Robert H. Lorsch, Chairman, CEO By: /s/ Richard S. Ziman ------------------------------- By: /s/ Bruce W. Bielinski Richard S. Ziman, ---------------------------- Managing General Partner Bruce W. Bielinski, M.D. Secretary By: /s/ Victor J. Coleman ------------------------------ Victor J. Coleman, Executive Officer 42

EXHIBIT "B" ----------- RULES AND REGULATIONS 1. No sign, advertisement or notice shall be displayed, printed or affixed on or to the Premises or to the outside or inside of the Building or so as to be visible from outside the Premises or Building without Landlord's prior written consent. Landlord shall have the right to remove any non-approved sign, advertisement or notice, without notice to and at the expense of Tenant, and Landlord shall not be liable in damages for such removal. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Tenant by Landlord or by a person selected by Landlord and in a manner and style acceptable to Landlord. 2. Tenant shall not obtain for use on the Premises ice, drilling water, waxing, cleaning, interior glass polishing, rubbish removal, towel or other similar services, or accept barbering or bootblackening, or coffee cart services, milk, soft drinks or other like services on the Premises, except from persons authorized by Landlord and at the hours and under regulations fixed by Landlord. No vending machines or machines of any description shall be installed, maintained or operated upon the Premises without Landlord's prior written consent. 3. The sidewalks, hall, passages, exits, entrances, elevators and stairways shall not be obstructed by Tenant or used for any purpose other than for ingress and egress from Tenant's Premises. 4. Toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. 5. Tenant shall not overload the floor of the Premises or mark, drive nails, screw or drill into the partitions, ceilings or floor or in any way deface the Premises. 6. In no event shall Tenant place a load upon any floor of the Premises or portion of any such flooring exceeding the floor load per square foot of area for which such floor is designed to carry and which is allowed by law, or any machinery or equipment which shall cause excessive vibration to the Premises or noticeable vibration to any other part of the Building. Prior to bringing any heavy safes, vaults, large computers or similarly heavy equipment into the Building, Tenant shall inform Landlord in writing of the dimensions and weights thereof and shall obtain Landlord's consent thereto, which consent Landlord shall have the right to deny. Such consent shall not constitute a representation or warranty by Landlord that the safe, vault or other equipment complies, with regard to distribution of weight and/or vibration, with the provisions of this Rule 6 nor relieve Tenant from responsibility for the consequences of such noncompliance, and any such safe, vault or other equipment which Landlord determines to constitute a danger of damage to the Building or a nuisance to other Tenants, either alone or in combination with other heavy and/or vibrating objects and equipment, shall be promptly removed by Tenant upon Landlord's written notice of such determination and demand for removal thereof. 1

7. Tenant shall not use or keep in the Premises or Project any kerosene, gasoline or inflammable, explosive or combustible fluid or material, or use any method of heating or air-conditioning other than that supplied by Landlord. 8. Tenant shall not lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by Landlord. 9. Tenant shall not install or use any blinds, shades, awnings or-screens in connection with any window or door of the Premises and shall not use any drape or window covering facing any exterior glass surface other than the standard drapes, blinds or other window covering. 2

EXHIBIT "C" ----------- NOTICE OF LEASE TERM DATES AND TENANT'S PERCENTAGE TO: _____________________________ DATE: ____________________________ _____________________________ _____________________________ RE: Lease dated ________________, 19___, between ______________________________ _______________________ ("Landlord"), and ______________________________________ ("Tenant"), concerning Suite ______, located at ______________________________. Gentlemen: In accordance with the Lease, Landlord wishes to advise and/or conform the following: 1. That the Premises have been accepted herewith by the Tenant as being substantially complete in accordance with the Lease and that there is no deficiency in construction. 2. That the Tenant has taken possession of the Premises and acknowledges that under the provisions of the Lease the term of said Lease shall commence as of __________________________ for a term of ___________________ ___________ ending on ____________________________________. 3. That in accordance with the Lease, Basic Rental commenced to accrue on _______________________. 4. If the Commencement Date of the Lease is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in said Lease. 5. Rent is due and payable in advance on the first day of each and every month during the term of said Lease. Your rent checks should be made payable to __________________________ at __________________________________ ____________________________________________________________________. 6. The exact number of rentable square feet within the Premises is _________ square feet. 1

7. Tenant's Percentage, as adjusted b:s1d upon the exact number of rentable square feet within the Premise is ________%. ------- AGREED AND ACCEPTED: TENANT: By: -------------------------- Its: -------------------------- 2

AMENDMENT NO. 1 TO LEASE AGREEMENT ---------------------------------- THIS AMENDMENT NO. 1 TO LEASE ("Agreement") dated as of tb12 16th day of January, 1996 by and between LAOP IV, LLC, a Nevada limited liability company ("Landlord") and SMARTALK TELESERVICES, INC., a California corporation ("Tenant"), with reference to the following recitals: A. Landlord and Tenant entered into that certain Lease dated January 10, 1996 ("Lease") for suite 500, consisting of approximately 6,795 rentable square feet ("Premises"), located in the building at 1640 Sepulveda Boulevard, Los Angeles, California 90025, known as Westwood Terrace ("Project"). B. Pursuant to Article 32 of the Lease, Landlord has provided Tenant with notice of the availability of approximately 1,729 rentable square feet of contiguous space ("First Refusal Space") to the Premises and Tenant has provided Landlord with written notification of its intent to exercise its right of first refusal to lease the First Refusal Space. C. Landlord and Tenant desire to amend the Lease to include the First Refusal Space as part of the Premises on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the terms, covenants and conditions as set forth in the Lease and in this Agreement, the sufficiency and adequacy of, which is hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows: 1. PREMISES: Article 1.B of the Lease shall be amended to delete the -------- number "6,795" as the definition of rentable square feet of the Premises and to replace it with the number "8,524" thereby reflecting that the Premises shall be defined as for all purposes under the Lease approximately 8,524 rentable square feet as designated on the plan attached hereto and incorporated in the Lease as Exhibit "A." 2. BASIC RENTAL: Article 1.C of the Lease shall be amended to reflect ------------ that Tenant shall pay to Landlord as Monthly Base Rental during the Lease term, the following amounts: 3. TENANT'S PROPORTIONATE SHARE: Article 1.E of the Lease shall be ---------------------------- amended by deleting the number "4.99045%" as the definition of Tenant's Proportionate Share under the Lease and replacing it with the number "6.26039%" reflecting that Tenant's Proportionate Share shall be defined as for all purposes under the Lease as 6.26039%. 4. SECURITY DEPOSIT: Article 1.F of the Lease shall be amended to ---------------- 5. PARKING PASSES: Article 1.1 of the Lease shall be amended to reflect -------------- that Tenant shall be entitled to twenty-six (26) unreserved parking spaces. Five (5) of the twenty-six (26) parking spaces located in the Project's parking structure may 1

be reserved parking spaces. The charges for all parking spaces shall be as set forth in the Lease. 6. 7. REPAIRS AND ALTERATIONS: Article 9 of the Lease shall be amended to ----------------------- 8. OPTION TO CANCEL: Article 35 of the Lease shall be amended to ---------------- 9. CAPITALIZED TERMS: Except as otherwise expressly provided herein to ----------------- the contrary, all capitalized terms used in this First Amendment to Lease shall have the same meanings given such terms in the Lease. 10. APPLICABILITY OF LEASE: All terms, covenants and conditions of the ---------------------- Lease, except as expressly amended herein are hereby ratified and shall continue in full force and effect throughout the term of the Lease, including any extension or renewal thereof. The terms, covenants and conditions expressly amended herein shall become effective upon the execution o this First Amendment to Lease Agreement by both Landlord and Tenant and the full and complete satisfaction of each and every one of the conditions set forth in Paragraphs 4 and 6 above. 11. AUTHORIZATION: Each individual and entity executing this First ------------- Amendment to Lease Agreement hereby represents and warrants that it has the capacity set forth on the signature page hereof with full power and authority to bind the party on whose behalf it is executing this First Amendment to Lease Agreement, to the terms hereof. 2

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and date first written above. "LANDLORD" "TENANT" LAOP, IV, LLC, SmarTalk Teleservices, Inc., a Nevada limited liability company, a California corporation By: Metropolitan Falls Partners, By: /s/ Robert H. Lorsch a California general partnership -------------------------- Its: Managing Member Robert H. Lorsch, Chairman, CEO By: /s/ Richard S. Ziman By: /s/ Bruce W. Bielinski --------------------------- -------------------------- Richard S. Ziman, Bruce W. Bielinski, M.D. Managing General Partner Secretary By: /s/ Victor J. Coleman --------------------------- Victor J. Coleman, Executive Officer 3

AMENDMENT NO. 2 TO LEASE AGREEMENT ---------------------------------- THIS AMENDMENT No. 2 TO LEASE ("Agreement") dated as of this 7th day of February, 1996 by and between LAOP IV, LLC, a Nevada limited liability company ("Landlord") and SMARTALK TELESERVICES, INC., a California corporation ("Tenant"), with reference to the following recitals: A. Landlord and Tenant entered into that certain Lease dated January 10, 1996 ("Lease ) for suite 500, consisting of approximately 6,795 rentable square feet ("Premises"), located in the building at 1640 Sepulveda Boulevard, Los Angeles, California 90025, known as Westwood Terrace ("Project"). The Lease was subsequently amended in or about February, 1996, to include approximately 1,729 rental square feet of additional contiguous space. The Lease and the Amendment are collectively referred to herein as the "Lease" and the term "Premises" includes the original Premises and the additional space added pursuant to the Amendment. B. Landlord and Tenant desire to amend the Lease to, among other matters, change the Commencement Date set forth in the Lease on the terms and conditions hereinafter set forth. NOW, THEREFORE, in consideration of the terms, covenants and conditions as set forth in the Lease and in this Agreement, the sufficiency and adequacy of which is hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows: 1. COMMENCEMENT DATE: Article 1.A of the Lease shall be amended by ----------------- deleting the following language: "On the later of (i) February 1, 1996," and replacing it with the following language: "The earlier of (i) March 25, 1996," 2. CAPITALIZED TERMS: Except as otherwise expressly provided herein to ----------------- the contrary, all capitalized terms used in this Agreement shall have the same meanings given such terms in the Lease. 3. APPLICABILITY OF LEASE: All terms, covenants and conditions of the ---------------------- Lease, except as expressly amended herein are hereby ratified and shall continue in full force and effect throughout the term of the Lease, including any extension or renewal thereof. The terms, covenants and conditions expressly amended herein shall become effective upon the execution of this Agreement by both Landlord and Tenant. 4. AUTHORIZATION: Each individual and entity executing this Agreement ------------- hereby represents and warrants that it has the capacity set forth on the signature page hereof with full power and authority to bind the party on whose behalf it is executing this Agreement. 1

"LANDLORD" "TENANT" LAOP, IV, LLC, SmarTalk Teleservices, Inc., a Nevada limited liability company, a California corporation By: Metropolitan Falls Partners, By: /s/ Robert H. Lorsch a California general partnership -------------------------- Its: Managing Member Robert H. Lorsch, Chairman, CEO By: /s/ Richard S. Ziman By: /s/ Bruce W. Bielinski --------------------------- -------------------------- Richard S. Ziman, Bruce W. Bielinski, M.D. Managing General Partner Secretary By: /s/ Victor J. Coleman --------------------------- Victor J. Coleman, Executive Officer 2

AMENDMENT NO. 3 TO LEASE AGREEMENT ---------------------------------- THIS AMENDMENT N0.3 TO LEASE ("Agreement") dated as of this 19th day of April, 1996 by and between LAOP IV, LLC, a Nevada limited liability company ("Landlord") and SMARTALK TELESERVICES, INC., a California corporation ("Tenant"), with reference to the following recitals: A. Landlord and Tenant entered into that certain Lease dated January 10, 1996 ("Lease") for Suite 500, consistency of approximately 6,795 rentable square feet ("Premises"), located in the building at 1640 Sepulveda Boulevard, Los Angeles, California 90025, known as Westwood Terrace ("Project"). The Lease was subsequently amended ("Amendment No. 1") in or about January or February, 1996, to, among other things, include approximately 1,729 rental square feet of additional contiguous space, and further amended on February 7, 1996, ("Amendment No. 2") to, among other things, recalculate the Commencement Date under the Lease. The Lease and the amendments are collectively referred to herein as the "Lease," and the term "Premises" includes the original Premises and the additional space added pursuant to Amendment No. 1. B. Landlord and Tenant desire to amend the Lease to, among other matters, document the Loan to Tenant for construction of the Tenant Improvements and the increase in Monthly Basic Rental for the repayment of the Loan, as more specifically set forth in the Lease, on the terms and conditions hereinafter set forth. C. Except as otherwise stated herein, all capitalized and defined terms have the same meaning as set forth in the Lease. NOW, THEREFORE, in consideration of the terms, covenants and conditions as set forth in the Lease and in this Agreement, the sufficiency and adequacy of which is hereby acknowledged, Landlord and Tenant hereby agree to amend the Lease as follows: 2. BASIC RENTAL: Article I.C. of the Lease and Paragraph 2 of Amendment ------------ No. 1 shall be amended to reflect that Tenant shall pay to Landlord as Monthly Basic Rental during the Lease term, the following amounts (which includes the repayment of the Loan with interest): 3. RENTAL ADJUSTMENT: Pursuant to the provisions of Paragraph 6 of ----------------- 4. APPLICABILITY OF LEASE: All terms, covenants and conditions of the ---------------------- Lease, except as expressly amended herein are hereby ratified and shall continue in full force and effect throughout the term of the Lease, including any extension or renewal thereof. The terms, covenants and conditions expressly amended herein 1

shall become effective upon the earlier of (i) disbursement of the Loan to Tenant, or (ii) execution of this Agreement by both Landlord and Tenant. 5. AUTHORIZATION: Each individual and entity executing this Agreement hereby represents and warrants that it has the capacity set forth on the signature page hereof with full power and authority to bind the party on whose behalf it is executing this Agreement. 6. DEFAULTS: As of the date of this Agreement, Tenant hereby represents and warrants to Landlord that Tenant is in full compliance with all terms, covenants and conditions of the Lease and that there are no breaches or defaults under the Lease by Landlord or Tenant, and Tenant knows of no events or circumstances which given the passage of time would constitute a default under the Lease by either Landlord or Tenant. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and date first written above. "LANDLORD" "TENANT" LAOP, IV, LLC, SmarTalk Teleservices, Inc., a Nevada limited liability company, a California corporation By: Metropolitan Falls Partners, By: /s/ Robert H. Lorsch a California general partnership -------------------------- Its: Managing Member Robert H. Lorsch, Chairman, CEO By: /s/ Richard S. Ziman By: /s/ Bruce W. Bielinski --------------------------- -------------------------- Richard S. Ziman, Bruce W. Bielinski, M.D. Managing General Partner Secretary By: /s/ Victor J. Coleman --------------------------- Victor J. Coleman, Executive Officer 2

NOTICE OF LEASE TERM DATES AND TENANT'S PERCENTAGE TO: Robert H. Lorsch, Chairman, CEO DATE: April 25, 1996 Bruce W. Bielinski, M.D., Secretary SMARTALK TELESERVICES, INC. 1640 S. Sepulveda Blvd., Suite 500 Los Angeles, CA 90025 RE: Lease dated January 10, 1996, Amendment No. 1 dated January 30, 1996, Amendment No. 2 dated February 7, 1996 and Amendment No. 3 dated April 19, 1996, between LAOP IV, LLC, a Nevada limited liability company ("Landlord") and SMARTALK TELESERVICES, INC., a California corporation ("Tenant"), concerning Suite 500, located at 1640 S. Sepulveda Boulevard, Los Angeles, California. Gentlemen: In accordance with the Lease, Landlord wishes to advise and/or confirm the following: 1. That the Premises have been accepted herewith by the Tenant as being substantially complete in accordance with the Lease and that there is no deficiency in construction. 2. That the Tenant has taken possession of the Premises and acknowledges that under the provisions of the Lease term of said Lease shall commence as of March 11, 1996 for a term of seventy-two months ending on March 31, 2002. 3. That in accordance with the Lease Basic Rental commenced to accrue on March 11, 1996. 4. If the Commencement Date of the Lease is other than the first day of the mouth, the first billing will contain a pro rata adjustment. Each billing thereafter shall be or the full amount of the monthly installment as provided for in said Lease. 5. Rent is due and payable on the first day of each and every month during the term of said Lease. Your rent checks should be mad payable to Hanford/Healy Agent for LBHI at P.O. Box 54177, Los Angeles, California 90051-4177. 6. The exact number of rentable square feet within the Premises is 8,524 square feet. 1

7. Tenant's Percentage, as adjusted based upon the exact number of rentable square feet within the Premises is 6.26039%. AGREED AND ACCEPTED: TENANT SMARTALK TELESERVICES, INC., By: /s/ Robert H. Lorsch ------------------------------- Robert H. Lorsch, Its: Chairman, CEO By: /s/ Bruce W. Bielinski ------------------------------- Bruce W. Bielinski, M.D. Its: Secretary 2

TO: SMARTALK TELESERVICES, INC. DATE: August 18, 1997 1640 S. Sepulveda Blvd., Suite 500 Low Angeles, CA 90025 RE: Fourth Amendment dated February 28, 1997 to Lease dated January 30, 1996 between ARDEN REALTY LIMITED PARTNERSHIP, a Maryland limited partnership ("Landlord") and SMARTALK TELESERVICES. INC., a California corporation ("Tenant"), concerning the Expansion Space on the fifth floor located at 1640 S. Sepulveda Boulevard, Los Angeles, California. Gentlemen: In accordance with the Lease, Landlord wishes to advise and/or confirm the following: 1. That the Expansion Space has been accepted herewith by the Tenant as being substantially complete in accordance with the Fourth Amendment to Lease and that there is no deficiency in construction. 2. That the Tenant has taken possession of the Expansion Space and acknowledges that under the provisions of the Fourth Amendment to Lease term of said Expansion Space shall. commence as of August 18, 1997 for a term of fifty- five months ending on March 31, 2002. 3. That in accordance with the Lease Basic Rental for the Expansion Space commenced to accrue on August 18, 1997. 4. If the Commencement Date of the Lease is other than the first day of the month, the first billing will contain a pro rata adjustment. Each billing thereafter shall be for the full amount of the monthly installment as provided for in said Lease. 5. Rent is due and payable on the first day of each and every month during the term of said Lease. Your rent checks should be made payable to Arden Realty(TM) Inc., 9100 Wilshire Blvd., Suite 700E, Beverly Hills, CA 90212. 6. The exact number of rentable square feet within the Expansion Space is 4,915 square feet for a total of 13, 439 square feet. 1

7. Tenant's Percentage, as adjusted based upon the exact number of rentable square feet within the Premises will increase to 3.6 1% on the Expansion Commencement Date. AGREED AND ACCEPTED: TENANT: SMARTALK TELESERVICES, INC. --------------------------- a California corporation By: ----------------------- Its -------------------- 2

FOURTH AMENDMENT TO LEASE ------------------------- THIS FOURTH AMENDMENT TO LEASE ("Fourth Amendment") is made and entered into as of the 28th day of February, 1997, by and between ARDEN REALTY LIMITED PARTNERSHIP, a Maryland limited partnership ("Landlord") and SMARTALK TELESERVICES, INC., a California corporation ("Tenant"): R E C I T A L S : - - - - - - - - A. LAOP IV, LLC, a Nevada limited liability company ("LAOP") and Tenant entered into that certain Standard Office Lease dated as of January 10, 1996 ("Original Lease"), as amended by that certain Amendment No. 1 to Lease Agreement dated January 1996 ("First Amendment"), that certain Amendment No. 2 to Lease Agreement dated February 28, 1996 ("Second Amendment"), and that certain Amendment No. 3 to Lease Agreement dated April 19, 1996 ("Third Amendment") collectively referred to as the "Amendments," whereby Landlord leased to Tenant and Tenant leased from Landlord certain space (the "Premises") located on the fifth (5th) floor of that certain building located at 1640 Sepulveda Boulevard, Los Angeles, California 90025 (the "Project"). The Original Lease as amended by the Amendments may be referred to herein as the "Lease" Landlord is the successor in interest to LAOP. B. Tenant desires to expand the Premises to include that certain space ("Expansion Space") located on the fifth (5th) floor of the Project, which space contains approximately 4,915 rentable (4,241 useable) square feet as delineated on Exhibit "A" attached hereto and made a part hereof. In connection therewith, Landlord and Tenant desire to amend the Lease as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: A G R E E M E N T : - - - - - - - - - 1. Capitalized Terms. All capitalized terms when used herein shall have ----------------- the same meaning as is given such terms in the Lease unless expressly superseded by the terms of this Fourth Amendment. 2. Expansion Commencement Date. The term "Expansion Commencement Date" --------------------------- shall mean the later of (a) March 15, 1997; or (b) the date upon which the Tenant Improvements have been substantially completed in the Expansion Space (as described in the Tenant Work Letter attached hereto as Exhibit "B"). 3. Addition to Premises. Effective as of the Expansion Commencement -------------------- Date, Tenant shall lease from Landlord and Landlord shall lease to Tenant the Expansion Space. Consequently, effective upon the Expansion Commencement Date, the original Premises shall be increased to include the Expansion Space. The term of Tenant's leases of the Expansion Space shall expire co-terminously with the Term of Tenant's lease of the original Premises on March 31, 2002. Landlord and Tenant hereby agree that such addition of the Expansion Space to 1

the original Premises shall, effective as of the Expansion Commencement Date, increase the number of rentable square feet contained within the Premises to thirteen thousand four hundred thirty nine (13,439) rentable square feet. 4. Tenant's Proportionate Share. Effective upon the Expansion ---------------------------- Commencement Date, Tenant's Proportionate Share shall increase to three point six one percent (3.61%). The Base Year specified in Section 1.A.D. of the Original Lease shall apply to Tenant's lease of the Expansion Space as well as the Original Premises. 5. Monthly Base Rental. Monthly Base Rental applicable to the Expansion ------------------- Space for the period from the Expansion Commencement Date and continuing until the expiration of the initial term of the Lease shall be as follows: 6. Improvements to Expansion Space. Landlord shall construct the ------------------------------- improvements to the Expansion Space pursuant to the terms and conditions of the Tenant Work Letter attached hereto as Exhibit "B." Except as specifically set forth in the Tenant Work Letter, Tenant hereby acknowledges that Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Expansion Space. Tenant also acknowledges that Landlord has made no representation or warranty regarding the condition of the Expansion Space. 7. Exterior Signage. Provided that Tenant is not in default under the ---------------- Lease and provided that Tenant has not assigned the Lease by means other than merger or consolidation, or subleased more than fifty percent (50%) of the Premises then under the Lease, Tenant shall be entitled, during the initial lease term and the Option Term (if applicable), to install and maintain one (1) sign identifying Tenant, with such sign to be located immediately above the window line on the fifth floor of the Project on the South side of the Project (the "Exterior Signage"). The graphics, materials, color, design, lettering, lighting, size, specifications and exact location of the Exterior Signage shall be subject to the prior written approval of Landlord, which approval shall be at Landlord's sole and absolute discretion. However, Landlord shall in no event approve Exterior Signage that would restrict another user from erecting similar Exterior Signage and Tenant's signage rights shall be non-exclusive. Landlord shall in no event approve exterior signage for another user that would abut Tenant's exterior signage. In addition, such signage shall be subject to Tenant's receipt of all required governmental permits and approvals and shall be subject to all applicable governmental laws and ordinances. The cost of installation of the Exterior Signage, as well as all costs of design and construction of such signage and all other costs associated with such signage, including, without limitation, utility charges and hook-up fees (if applicable), permits, maintenance and repair, shall be the sole responsibility of Tenant. Tenant further acknowledges that any repairs necessitated as a result of window washing equipment cabling passing over such signage in the normal course of cleaning the exterior 2

windows of the Project shall be the sole responsibility of Tenant. The rights set forth in this Section 7, and Landlord's obligations with respect thereto, shall be personal to the originally named Tenant under this Fourth Amendment and may only be exercised by the originally named Tenant, and not any assignee, subtenant or other person or entity. (a) Monthly Basic Rental For Exterior Signage. Monthly Basic Rental ----------------------------------------- for the Exterior Signage right shall commence as of the Expansion Commencement Date and shall be in the amount of One Thousand Dollars ($1,000.00) per month during the initial Lease Term (which amount is reflected in the schedule in Section 5 above) and One Thousand Five Hundred Dollars ($1,500.00) per month during the Option Term (if applicable), said rental to be paid at the same time as Tenant's Monthly Basic Rental for the Premises and in accordance with the terms of the Lease. (b) Maintenance of Exterior Signage. Should the Exterior Signage ------------------------------- require maintenance or repairs as determined in Landlord's reasonable judgment, Landlord shall have the right to provide written notice thereof to Tenant and Tenant shall cause such repairs and/or maintenance to be performed within thirty (30) days after receipt of such notice from Landlord, at Tenant's sole cost and expense; provided, however, if such repairs and/or maintenance are reasonably expected to require longer than thirty (30) days to perform, Tenant shall commence such repairs and/or maintenance within such thirty (30) day period and shall diligently prosecute such repairs and maintenance to completion. Should Tenant fail to perform such maintenance and repairs within the periods described in the immediately preceding sentence, Landlord shall have the right to cause such work to be performed and to charge Tenant as additional rent for the costs of such work. Upon the expiration or earlier termination of the Lease, Tenant shall, at Tenant's sole cost and expense, cause the Exterior Signage to be removed from the exterior of the Project and shall cause the exterior of the Project to be restored to the condition existing prior to the placement of such signage. If Tenant fails to remove such signage and to restore the exterior of the Project as provided in the immediately preceding sentence within thirty (30) days following the expiration or earlier termination of the Lease, then Landlord may perform such work, and all costs and expenses incurred by Landlord in so performing shall be reimbursed by Tenant to Landlord within ten (10) days after Tenant's receipt of invoice therefor. The immediately preceding sentence shall survive the expiration of earlier termination of the Lease. 8. Parking. Tenant shall be entitled to lease fourteen (14) parking ------- passes, of which three (3) may be reserved at Tenant's request and subject to availability as determined by Landlord, in addition to those passes Tenant is entitled to lease under the Original Lease, located in the Project's parking facility, at prevailing market rates. Said additional parking passes shall increase Tenant'' total number of parking passes to forty (40), of which Tenant shall be entitled to request a total of eight (8) reserved parking passes, subject to availability as determined by Landlord. Any such reserved parking passes shall be for reserved parking at a location in the Project'' parking facility designated by Landlord. 9. 10. Cancellation Rights. Article 35 of the Original Lease (as amended by ------------------- Section 8 of the First Amendment) is hereby deleted in its entirety. 3

11. No further Modification. Except as set forth in this Fourth ----------------------- Amendment, all of the terms and provisions of the Lease shall apply with respect to the Expansion Space and shall remain unmodified and in full force and effect. "LANDLORD" ARDEN REALTY LIMITED PARTNERSHIP, a Maryland limited partnership By: Arden Realty, Inc. a Maryland corporation, Its sole general partner By: /s/ Victor J. Coleman ------------------------------------- Victor J. Coleman President and COO By: /s/ ------------------------------------------ Its: CEO ------------------------------------- Richard S. Zieman Chairman and Chief Executive Officer "TENANT" SMARTALK TELESERVICES, INC. a California corporation By: /s/ ------------------------------------------ Its: CFO ------------------------------------- By: ------------------------------------------ Its: ------------------------------------- *** 4

EXHIBIT 10.11 SUBLEASE -------- THIS SUBLEASE (the "Sublease") is made as of April 1, 1998, by and between SMARTALK TELESERVICES, INC., a California corporation. whose mailing address is 5500 Frantz Road, Suite 124, Dublin, Ohio 43017 ("Sublessor"), and THE RHL GROUP, INC., a California corporation, whose mailing address is Suite 500, Westwood Terrace, 1640 Sepulvada Boulevard, Los Angeles, California 90025 ("Sublessee"). WITNESSETH: ---------- WHEREAS, LAOP IV, LLC, a California limited liability company ("Landlord") and Sublessor entered into that certain Standard Office Lease dated as of January 10, 1996, as amended by Amendment No. 1 to Lease Agreement dated as of January 16, 1996, Amendment No. 2 to Lease Agreement dated as of February 7, 1996, Amendment No. 3 to Lease Agreement dated as of April 19, 1996, Notice of Lease Term Dates and Tenant's Percentage dated April 25, 1996, Fourth Amendment to Lease dated February 28, 1997, and Notice of Lease Term Dates and Tenant's Percentage dated August 18, 1997 (collectively, the "Lease") covering certain premises known as Suite 500, Westwood Terrace, 1640 Sepulvada Boulevard, Los Angeles, California, 90025 (including all rights appurtenant thereto as provided in the Lease, hereinafter referred to as the "Premises"); and WHEREAS, Sublessor desires to sublet the entire Premises to Sublessee and Sublessee desires to sublet the entire Premises from Sublessor, on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the rents reserved and the other terms and conditions hereinafter set forth, Sublessor and Sublessee hereby agree as follows: 1. Relationship to Lease. This Sublease and all its terms, covenants --------------------- and provisions are and each of them is subject and subordinate to the Lease, the terms of which are specifically incorporated herein by reference. In the event Landlord provides Sublessee with notice that Sublessor is in default under the Lease following the expiration of any grace or cure period. Sublessee shall thereafter make all payments due under this Sublease directly to Landlord, which will be received by Landlord without any liability to honor this Sublease or otherwise (except to credit such payments to amounts due under the Lease and Sublessee shall attorn to Landlord or its successors and assigns at their request should the Lease be terminated for any reason, except that in no event shall Landlord or its successors or assigns be obligated to accept such attornment. Sublessor shall provide to Sublessee, promptly, copies of any and all notices it receives from the Landlord regarding the Lease. Sublessor (i) represents and warrants in favor of Sublessee that all payments to be made by the tenant under the Lease through the date of execution of this Sublease have been made and (ii) agrees to remain responsible for and indemnify and hold Sublessee harmless against any payments due under the Lease attributable to all periods through and including March 31, 1998. 1

2. Performance of Lease Term. With respect to the Premises, Sublessee ------------------------- hereby expressly agrees during the Term (hereinafter defined) to be subject to and bound by and to observe, and this Sublease shall be deemed to contain. all of the covenants, stipulations, restrictions, agreements and other provisions contained in the Lease to the extent the same are applicable to the Premises, except the covenant to pay the rent provided in the Lease and except as expressly modified, excluded or otherwise specifically addressed in this Sublease. Sublessee further agrees not to take or cause to be taken any action which would cause Sublessor to be in default under the Lease. 3. Premises. Upon the terms and conditions hereinafter set forth, -------- Sublessor hereby subleases to Sublessee, and Sublessee hereby hires and takes from Sublessor, the entire Premises on an "AS IS" basis including any right of Sublessor under the Lease to utilize the common areas of the property of which the Premises are a part (including, without limitation, the use of the 20 parking spaces pursuant to the terms of the Lease), provided that Sublessee shall use the same in such a manner as permitted and required by the Lease. Sublessee shall purchase from Sublessor all of the office furniture, trade fixtures and personalty (including, without limitation (i) the telephone system and (ii) the computer equipment listed on Schedule A attached hereto) owned by Sublessor and located in or at the Premises as of the date of the execution hereof (the "Equipment") for the appraised value of the Equipment (as established by an appraiser selected by Sublessor and reasonably acceptable to Sublessee), payment for such purchase to be made by Sublessee to Sublessor within five (5) days of receipt of an invoice for such amount from Sublessor. The Equipment shall specifically exclude any business files and/or records of Sublessor and any inventory (including phone cards) which business files, records and inventory shall be recovered by, or returned to, Sublessor promptly after the execution hereof without limitation